Residual values for some mainstream diesel fleet cars could drop below their petrol equivalents, according to predictions by GE Capital Fleet Services.

The company suggests that lower and upper medium diesel non-prestige models that are currently on run-out will almost certainly be in oversupply in three years' time.

Mark Chapman, European asset management director, says: “The current, high demand for diesels in the fleet market is caused almost entirely by the benefit in kind taxation regime. The used car buyer of 2007 will not be affected by that market distortion and will be faced with a dated car using last generation diesel technology.

“That buyer will probably not be willing to pay any kind of premium for a diesel engine and, in fact, the diesel could easily be seen as a generally less attractive proposition with prices dropping a little below the equivalent petrol model.”

GE CFS believes that prestige and latest technology diesel cars will continue to command a premium of sorts but that even here the differential will be slimmer.

“Prestige cars with high technology diesel engines are now very well established in the market and there will remain buyers who will pay more for them. However, there will be many more of these on the market and we believe that prices will inevitably fall, although they should still stay ahead of petrol equivalents,” says Chapman.

He added that diesel cars were only attractive to certain used car buyers and that, if fleet sales continued to rise, a general move towards parity with petrol was inevitable.

Chapman said: “There are a number of factors at play: diesel engines remain an unknown quantity to the more conservative used car buyer who will usually opt for petrol; a large number of buyers prefer petrol engines; and paying a premium for a diesel only really makes sense for drivers who cover higher mileages. All of these issues mean that used diesel car premiums cannot continue at their current rate.”

GE Capital Fleet Services, operating in the UK under brand names of Avis Fleet Aervices, Leasecontracts and Cochranes Fleet Services, is part of GE Commercial Finance.

GE CFS, is a global fleet management company with operations in the US, Canada, Mexico, Europe Japan, Australia and New Zealand. GE CFS has more than 1.2m vehicles worldwide and more than 220,000 cars in Europe under lease and service management. In the UK, GE CFS, with head offices in Sale near Manchester has 250 employees, and a fleet of 54,000 vehicles.