Is the diesel backlash beginning to bite in the used car arena?

By Rob Donaldson, car editor Glass's

Despite extensive negativity in the press towards diesel following the emissions scandal of 2015, and a sudden resurgence of interest in petrol, used diesel values have held up very well. Diesel cars remain a popular choice for consumers due to their excellent fuel economy and generally, they look good value for money. While new diesel car registrations collapse, in the wholesale market, the conversion rate of used diesels were on a par with petrol cars, indicating that demand amongst dealers and traders remained strong.

High on the political agenda in recent months (apart from Brexit) is climate change, with numerous public protests attempting to pressurise government and councils into finding ways to slow down and reverse pollution levels. Of course, the car (those with an internal combustion engine anyway) are in the crosshairs and especially diesels.

Today, diesels are being more penalised than ever before with higher benefit-in-kind tax rates for company car users, the introduction of the Ultra-low emission zone charge in London with more councils to follow. Additionally, some councils now charge more for diesel cars to have parking permits in urban areas. This makes the economic reason to own a diesel car less compelling for the used buyer and it may be starting to show in the wholesale market too.

The following chart shows the first time conversion rate of petrol and diesel cars at auction. It clearly demonstrates strong diesel performance in line with petrol cars until the end of the third quarter of 2018. Since then, diesel appears to have underperformed with the gap widening.

Drilling down further into the data to focus on cars between 2.5 and 4.5 years of age, an age group where the bulk of younger diesel cars sit and encompasses cars from the leasing industry, the chart below shows diesel dropping from best performing to worst performing fuel type in this age group in the last 6 months.

It is possible that the used market is beginning to catch up with the new car market in the rejection of diesel as the declining economic benefit and growing unpopularity of the fuel type rises? Alternatively, the wholesale market may be resetting itself where an increased supply of diesel is outstripping demand. It is worth remembering three years ago, the new car market registered a record amount of new cars, it is logical that more would end up in wholesale channels in this period. It will be interesting to see how this dynamic develops over the next few months.