Manufacturers must look to control the number of new cars going into the market to ignite interest in used vehicles, according to a leading motor industry expert.

Prof Peter Cooke, at the centre for automotive industries management at Nottingham Business School, believes carmakers need to redress the balance between new and used sales to help dealers boost profits and rescue residual values which are among the worst in Europe.

He points out that most manufacturers have refurbishment facilities to prepare cars to retail standards which should be sold through high-profile branded programmes. “The UK suffers from poor residual values because carmakers stuff the market with used cars,” says Cooke.

“They are preoccupied with maximising new car market penetration when they should be focusing on profitability. The used car business will help to compensate dealers for the ongoing drop in new car prices.”

A few prestige carmakers like Porsche have sought to contain sales across Europe, which has given them strong values, but their lead needs to be followed by the volume makers to prevent a residuals collapse in the UK this year.

The latest CAP Index shows that residuals have taken their biggest tumble for 18 months as consumer confidence slumps. Mainstream cars in the upper medium and supermini sectors are struggling the most.

Ramesh Notra, CAP economics editor, believes the market is “extremely unstable”. He adds: “The August market is traditionally quiet and September's new plate will bring even more used cars into the market in part-exchange. Therefore it seems unlikely that the picture will improve for some time.”