Cleaner vans could create two tier used market

The decision by the European Parliament to ensure 100% of vans are sub 147g/km CO2 emissions by 2020 could create a two tier used market, according to Shoreham Vehicle Auctions’ managing director Alex Wright.

He believes in the quest to reduce CO2 emissions the European Parliament is yet to take into account the impact on the second hand market of these initiatives.

“There will become a two tier used system with sub 147g/km vans being stocked predominantly by franchised dealers, with prices well out of the reach of most SME used van buyers,” said Wright.

“Vehicles with emissions above 147g/km will instantly see residuals fall and overall running costs, such as Vehicle Excise Duty increase.”

He fears the moves to reduce emissions will eventually end up as a tax on SMEs who are the lifeblood of the used van industry.

“My fear is that by taxing the higher emission vans, SMEs will be faced with much higher costs if they want to buy and run a younger vehicle. That could dramatically weaken the demand for used vans three years before the proposals are introduced which will impact the entire market,” he said.

Leasing companies need to be particularly aware of a potential reduction in demand along with utilities, the large outright purchase fleets and the rental sector as they feed in many tens of thousands of vans into the used market each year.

“Those underwriting future residual values will have to treat future price predictions with caution as residuals are likely to fall on both the older and newer vans alike, even before the proposals are introduced,” he said.

“While the ‘green’ low CO2 vans may tick all the right boxes in Governmental circles, demand in the used market may not be as high because used buyers such as SMEs don’t have the credit rating to secure enough finance to purchase. Franchised dealers may have to find a new buyer for this type of van.

“Vans with emissions higher than 147g/km over a three or four year period may well be worth less as the operating costs are likely to rise quite dramatically.”