RESIDUAL values could tumble and leasing rates rocket as manufacturers pump an increasing number of new cars into the market with no buyers. Some of the UK's leading fleet manufacturers were attacked this week for encouraging their dealers to register more cars and increase demonstrator replacement cycles in pursuit of market share.

As a result private buyers who previously bought nearly new ex-fleet cars - mostly upper medium sector models - moved into the new car market to take advantage of attractive deals ,leaving forecourts packed with unsold nearly new vehicles. The phenomenon, which is not new, coincided with an influx of ex-rental and ex-demonstrators registered in August last year which are traditionally defleeted in the spring.

As a result Glass's Guide this week said P and R-plate Ford Mondeos and Vauxhall Vectras had lost more than £1,250 this year when in the same period in recent years the drop would be half that amount. And, while the June issue of the guide said the ripple effect on three-year-old cars was not so extreme - perhaps a further £300 on a Mondeo - the impact was 'very damaging' for the leasing industry. It also warned of a knock-on effect on other upper medium sector cars which would compound the problem in the market place.

Both Glass's Guide and CAP Motor Research say a number of other factors are affecting the new car market, including the strength of Sterling and attractive financing packages. Mark Cowling, chief economist at CAP, said: 'Normally you would expect a rise in residual values between January and spring, but this has not happened this year. It has caught people out, because when prices were going up, they assumed they would do that forever.'