The trade value of an average three-year old used car has fallen by 5.2%, or £440, since the end of March, according to the latest quarterly Glass’s Car Market Index report.

The typical Y-plate vehicle with 36,000 miles is now £7,423.

Glass’s says the fall reflects a slightly higher rate of depreciation compared to the first quarter of the year, although values themselves are still higher than in the second quarter of 2003.

Compact MPVs have suffered the greatest falls in their value over recent months.

Glass’s says current rates of depreciation may accelerate slightly due to higher interest rates, fuel prices and a degree of growing uncertainty about the housing market. It predicts a 2.5% fall in the value of the average three-year-old Y-plated car during July, and suggests a possible increase in the rate of depreciation over the coming calendar-year quarter.

  • The full report is free. Email: marketing@glass.co.uk to request a copy.

    Key extracts from the latest Glass’s Car Market Index:

    1) Trends in three-year-old car values

    Comparing the second quarter of 2004 with the same period last year, average three-year-old used car values currently remain higher. Glass’s says this positive difference has narrowed, from £540 at the end of the first quarter of this year to £425 by the end of the second quarter. This difference is likely to narrow further in the next few months. The degree to which confidence will weaken depends largely on future base rate action by the Bank of England and the buoyancy of the housing market.

    2) Trends in new car list prices

    Since June of last year, list prices have increased, on average, by 1.6 per cent, or £265. Glass’s says further increases are inevitable as manufacturers increase the model specifications and introduce technical enhancements such as Euro IV compliant diesel engines.

    However, it is unlikely the rise in list prices has been mirrored by transaction prices. “The requirement to maintain or enhance market share has led to a proliferation of ever-more competitive incentives, and therefore transaction prices are unlikely to have increased at the same rate as list prices," says Alan Cole, editorial consultant at Glass’s.

    3) Used car value trends – one-year-old cars

    The Car Market Index assesses the values of nearly new cars, up to one-year-old. Since the end of the first quarter of this year, values of one-year-old 03-plated cars have, on average, reduced by £502 or 4.4%. This downward trend is expected to continue during July.

    4) Used car value trends – five-year-old cars

    Since the end of the first quarter of this year, five-year-old T-plated used cars have reduced in average value by £325 or 6.3 per cent. This softening of values is expected to continue into the summer.

    5) Trends in three-year-old car values by market sector

    The Car Market Index provides detailed insight into patterns of changing residual values in key market sectors. To find details of the residual value performance of individual models, please request the full version of the latest Car Market Index report (see contact information, below).

    The sectors covered in the Index are as follows:

  • Superminis: Higher new sales volume has now meant an easier supply of used superminis, which has led to a reduction in values. At the end of the first quarter of 2004, values were £112 higher than they were at the same point in 2003, but they have since fallen back, eliminating this premium. During the last three-months, the average Y-plated three-year old supermini has reduced in value by £350 or 8.2 per cent.

  • Lower-medium cars (mid-sized family hatchbacks): Since the end of the first quarter, the average value of a Y-plated three-year-old lower-medium sector car has fallen by £415, or 8.2 per cent. Compared to the same period of last year, three-year-old used car values in this sector continue to be higher, although the gap is narrowing. Values were £395 above the 2003 level at the end of the first quarter of this year. This premium will have reduced to £285 by June.

  • Compact MPVs: The average three-year-old Y-plated compact MPV has suffered the greatest additional fall in used values of all sectors considered by the Car Market Index, in both financial and percentage terms. This is due to the increasing availability of used examples within this relatively new market sector. "Since the end of the first quarter of 2004, used values have reduced by 9.2 per cent or £625, albeit from a fairly high point. We expect this trend to continue during July at probably the same rate," adds Cole.

  • Upper-medium cars (volume brand larger family saloons and hatchbacks): During the last three-months the average Y-plated three-year-old upper-medium sector used car has reduced in value by £575 or 9.2 per cent. Compared to the same period in 2003, used values in this sector were £345 higher at the end of the first quarter, but by the end of the second quarter the difference had narrowed to £200. Cole says, "Lower new car registrations in recent years have meant that the supply situation of used examples is now better balanced with demand, which has led to firmer used car values."

  • Compact executive cars: Since the end of the first quarter, the value of the average three-year-old Y-plated upper-medium executive sector car has fallen by £610, or 5.3 per cent. At the end of the first quarter, the average used value for this sector was £700 better than it was a year earlier. By June 2004 this comparative situation had weakened, although three-year-old values still remain £445 higher. This is a trend Glass’s expects to continue due to the increase in volume of cars from this sector.

    The next Glass’s Car Market Index report will profile the third quarter of 2004 (July to September) and will be published in early October.