LEASING and rental rates are set to increase over the next three years as instability in the used car market continues, according to a new report. 'European Used Car Dynamics 2001 - The Changing Landscape of Remarketing Strategies' from Datamonitor also predicts that by 2005 more than 25,000 used vehicles will be disposed of on the internet by leasing companies and manufacturers.

The near two-year residual value crash will continue to force leasing companies to claw back lost profits through increases in rates over the next three years as companies implement tougher residual value forecasts, says the report. And with leasing and rental companies increasingly targeting business-to-business and business-to-consumer sectors with their internet remarketing strategies, the report suggests an increase in the number of dotcom branded online used car transaction sites linked to leasing and rental companies.

The report highlights that by 2005 UK-based leasing companies will remarket more than 25,000 used cars through the internet. It also claims the fastest growing sector of the used car market is defleeted three-to-five-year-old cars - 28% share last year to 29.4% in 2005 - largely due to the continued expansion of the fleet sector. The size of the sub-one-year-old car sector is also predicted to increase from a 4.5% share last year to 5.9% by 2005.

Following the residual value crash the report claims: 'The UK used car market is undergoing a period of stabilisation, where residual values are realigning to new car prices. For the next two years, the used car market will continue to experience decline in residual values in the rental and the leasing industries.' Claiming 'stagnancy' in the size of the secondhand market and over saturation, the report says: 'Many leasing and rental companies have halted operations or reduced the number of vehicles they have purchased.

'Many manufacturers are trying to combat the problems by reducing the number of vehicles provided to rental companies. They are also increasing the quality control on buy-backs from rental companies allowing them to reduce the risk when attempting to sell the cars. Leasing and rental companies are attempting to counter the problems by increasing replacement periods and imposing tighter quality controls.'

For further details, call Datamonitor on 0207 675 7824/ 0207 675 7000/ or e-mail them on ausales@datamonitor.com