Fleet & Lease Diesel values under pressure
The average price premium that diesel enjoys over petrol in the fleet/lease sector eroded completely in Quarter 2, 2007, according to price data from BCA.Despite being sold at a higher mileage, diesel values from fleet and lease sources were on average around 5% higher than petrol values throughout 2006.
BCA’s latest Pulse Report shows that differential has been narrowing in recent months and now appears to be reversing completely. Values in the part-exchange sector, however, are not following the same pattern.
In April, 2007 average Fleet/Lease diesel values fell by £35 to £7,138 (still the second highest monthly diesel value on record). However, petrol values surged ahead again to a new record value of £7,542. This represented a rise of nearly £400 over March and was the first time that petrol values have exceeded diesel values since Pulse began reporting.
A more familiar picture was seen in May however, with diesel values again in the ascendancy – but only by £57, equivalent to a premium of less than 1%.
June re-established petrol’s price supremacy however, with average values rising by £518 to £7,479. Diesel values meanwhile were falling by £142 in the month to £6,876 – this gave petrol cars a price premium of 8.7% over diesel.
The quarterly figures soften the effect, but still show petrol cars averaging £7,319 in Q2 against diesel cars at £7,014, giving petrol power a 4.3% premium over diesel. It is the first quarter where average fleet & lease petrol car prices have exceeded diesel car values.
Tony Gannon, BCA Communications Director commented “Average diesel values have fallen in each of the last three months although they remain well ahead, year-on-year.”
He added “Of course, fleet and lease sourced diesels come to the market at a much higher average mileage, and mileage-adjusted values would tip the price premium back in diesel’s favour. However, the long-term price trend clearly seems to indicate a continued narrowing in values between petrol and diesel.”
Throughout 2006, the price differential remained around 5% in diesels favour, but began eroding early in 2007. This almost certainly reflects the increased numbers of diesels entering the fleet market as new cars some three years ago.
Notably, values in the part-exchange sector are not demonstrating the same trend. P/X diesel values crept above £5,000 for the first time in April, and remained above that benchmark in the two following months, while petrol values have stalled under £3,000 for some months. In contrast to the values recorded for fleet and lease cars, the price differential between petrol and diesel from part-exchange sources is actually increasing.
Gannon said “This is largely down to supply and demand. Diesels make up only around 15% of the stock coming from part-exchange sources, making them scarcer and more desirable in the budget end of the market.”
Gannon concluded “With fleets registering increasing numbers of diesel cars in recent years, it is tempting to suggest that used fleet diesels will continue to get relatively cheaper. However, the market dynamics are not that simple. If motorists follow the lead set by fleet operators – as they inevitably do – we could see increasing demand for used diesels matching the rising supply of stock available to the market.”
