Demand remains as strong as ever for diesel cars at auction, in fact the overall conversion rate in March was slightly above last year’s figure. It is worth remembering that there are no fiscal penalties associated with owning a diesel car and they remain popular with used retail buyers.
As can be seen in the chart below, there has been a resurgence of interest in petrol models and they have been converting at a slightly faster rate than diesel at auction, for most of the last 12 months. That said, diesel cars appear to have been holding their own.
Strong hammer prices
Hammer prices at auction have been generally strong so far this year, regardless of fuel type. This has led to Glass’s values remaining reasonably stable, even strengthening throughout quarter one in the popular ‘Lower Medium’ segment, as can be seen in the chart below.
This shows Glass’s average trade value at 3 years and 60,000 miles when expressed as a percentage of original cost new price. It shows a comparison of petrol and diesel models. This segment has historically had a fairly equal split of petrol and diesel sales and contains popular volume models such as the Ford Focus and Volkswagen Golf. Petrol models have been outperforming diesel, but rather than suffering a significant downturn in values, diesel has remained consistent.
A similar pattern has emerged in the ‘Premium Upper Medium’ segment which includes models that are popular with fleet operators, such as the Audi A4, BMW 3 series and Mercedes C-Class.
Throughout 2017 the gap between diesel and petrol widened with average diesel residual values reducing by around 1%, but it is worth remembering that the volume of diesel significantly outstrips petrol in this diesel dominated sector, which has resulted in values for the in-demand and undersupplied petrol variants increasing.
Interestingly however, diesel cars in the ‘Premium Upper Medium’ segment converted at a slightly faster rate than petrol in February and March this year. That said petrol models had the upper hand for much of last year. It could be possible that petrol values are beginning to reach a ceiling in this segment.
Over the past 12 month’s petrol models have consistently outperformed diesel in virtually all segments. As an example, if we look at the popular ‘Supermini’ segment that contains high volume models such as the Ford Fiesta, it is perhaps unsurprising to see that petrol outperforms diesel, as petrol tends to be more popular on smaller sized cars.
In volume terms, petrol cars entered into auction channels from this segment outnumber diesel by three to one, so in a normal market the rarity of diesel would be expected to have a positive effect on conversion rates, which isn’t the case.
There is no suggestion however that diesel models fail to sell, in fact so far this year demand from trade buyers has been exceptional for anything in this segment regardless of fuel type, so long as the car is presented in reasonable condition.
Short term prospects
It is clear that there is a shift away from new diesel cars and many people are asking the question – will a similar trend emerge in the used market? There are currently no signs of diesel values significantly weakening and there is no short-term forecast that they will suffer any kind of crash.
The used car market has been very strong over the past few years and the signs are that it is strengthening still further, as activity in the new car market softens. Diesel still has a very strong part to play in the used car market, which is good news as there is no shortage of them due back at the end of contract hire and PCP terms.
It will be interesting to see however, what will happen to petrol and diesel values in three to four years’ time, when less diesels are expected to be de-fleeted, yet there will be an increase in petrol volumes. We could see a resurgence in diesel values with petrol performance softening in line with the supply and demand dynamic.