An industry row has broken out over whether the residual values of diesel cars will slump in the future as a result of their soaring popularity among company car drivers.

Fleet management group ALD Automotive predicts that supply of used diesels will outstrip demand during the next few years.

The fleet management group has seen a surge of drivers wanting diesel vehicles with derv accounting for 76% of its total orders last November.

Deputy managing director Nigel Fletcher says: '"As diesel cars start to return to the used car market over the next two years we will see a dramatic reduction in their value unless the industry and manufacturers get a strategy together to make the cars more attractive to the used car buyer.

"The downturn in diesel vehicle residual values will be reflected in a rate rise on new diesels as predicted second hand values will not be achieved and that will make petrol cars cheaper from a monthly rental viewpoint.'"

However, some industry figures have dispelled the idea that diesel residuals will fall.

Tom Madden, director of customer affairs at BCA, says: "While new diesel volumes have risen and are likely to continue at high levels, this does not mean the market will be seeing falling residual values for used diesels in the future.

"We believe that an ex-fleet diesel, well-maintained, in a good specification and colour, direct from the one company owner will always be a desirable, premium product at remarketing time.

"Over the years it has become a hobby to predict the demise of diesel. No one has got it right yet and it certainly will not be happening in the next two years,'" he added.