Despite plunging demand for new diesels, the used market is receptive to the efficiency and CO2 benefits of the fuel.
While sales of new diesel cars continue to plummet, the story is very different in the used market, where buyers rate the efficiency gains as more important than the political or environmental concerns.
“Used demand has been very consistent, and we believe this will continue through 2020 as low stock levels and an ever-growing demand keeps prices consistent,” says auction firm Aston Barclay’s managing director, Martin Potter.
He believes there is “potential for prices to rise further as stock volumes lessen with new car sales falling over the past 18 months.”
New diesel car sales dropped by 17.9% in 2019 versus an already-diminished 2018 level, and diesel’s market share on new sales dropped from 31.7% in 2018 to 26.6%.
“Demand for new diesel cars is waning, although it is looking like demand won’t fall much further,” says Rupert Pontin, director of valuations at market expert Cazana.
“For some drivers this fuel type is relevant due to economy; for others that have shifted to petrol, the reality of higher fuel consumption is hitting home and there is a possibility of a return to diesel.”
That drop in new sales means used diesels are rarer in a used market more willing to accept the negative publicity surrounding the fuel.
“Used car buyers are still cost-conscious, and as such the environment tends to take second place to the wallet,” continues Pontin. “Pricing has remained constant, unlike petrol pricing.” He predicts that still higher sale prices for diesel product is a possibility.
Larger cars continue to be the sweet spot for diesel popularity, with “limited” desire for smaller diesels, according to Pontin. “Family cars have a reasonable diesel demand, as do crossover SUVs, and as the car gets larger, demand for diesel power improves on a power/weight/economy basis.”
DIESEL AUCTION VALUES ON THE RISE
BCA sales data shows that diesel cars sold at auction have risen in value, despite the average age increasing by five months and the average miles up by almost 2000 miles when comparing February 2020 with February 2019.
LEZs COULD LEAD TO DEMAND FOR NEWER DIESEL TECH
Although there’s little evidence yet of a shift in demand based on new low-emission zones, experts predict that things could change quickly.
“At present, the demand in certain locations varies based on the emissions, although pricing has not yet shown definitive shifts,” says Rupert Pontin of Cazana. “This is perhaps because the dealers are more careful with what they buy and where they stock it.”
However, he did question how many areas will actually introduce city zones that ban certain vehicles.
Light commercial vehicles are beginning to show evidence of geographical-related movement, according to Aston Barclay’s Martin Potter. “Euro6 vans have seen an increase in residuals versus Euro5 vans, and this is likely to continue, particularly around the London area where non-Euro6 vans are penalised with higher congestion charge fines,” he said. “Demand for Euro5 vans has remained strong with buyers in Wales and the south west of England. These are two areas that aren’t impacted by low-emission zones.”
FUEL FOR THOUGHT
BCA’s COO UK Remarketing Stuart Pearson, gives his thoughts on how to read the market’s attraction to diesel
1. Diesel demand staying strong
Demand for diesel in the used sector has remained strong, and for many used car buyers, diesel will remain the preferred choice of fuel type because it offers great economy and typically lower running costs.
2. Prices on the up as retailers see profit potential
Overall, average diesel prices at BCA are rising steadily, largely as a result of the high-quality stock, but also underlining that trader buyers continue to see a profit opportunity in diesel product.
3. Rapid evolution of the market needs careful study
There is a complex and evolving picture in the wholesale sector, and sellers should look to real-time data to inform remarketing decisions. BCA Valuations provides an immediate and detailed view of market performance based on actual auction prices and is helping our vendor customers to value their vehicles in line with market sentiment.
4. Bigger is better for diesel, with models exempt from Clean-Air Zones (CAZ) better still
There will continue to be demand for diesel in segments where it makes sense, such as SUV and 4×4, and as clean-air zones are announced in cities around the UK, we expect to see demand rise for those exempt vehicles with the latest clean diesel technology.