The war between the two major fuels is intensifying. Lofty prices at the pumps and a big difference between the figures fleets are paying for petrol and diesel means businesses are now having to crunch the numbers carefully before defaulting to the fuel they’ve always gone for in the past.

This is even more crucial come defleet time because there’s no point trying to shift petrol-engined models if it isn’t what the used market wants.

That said, even accounting for the difference at the pumps, it will come as no surprise that diesel is still the dominant force for ex-fleet and lease cars.

BCA’s operations director Simon Henstock says there can be as much as a four-figure difference between the two: “There can be little argument that the average price of a fleet and lease diesel car always outperforms that of a similar average petrol model. Research. shows there is a clear and significant difference in average value at remarketing time – never less than £1100 over the past year and rising to as much as £1747 in October 2012, which was equivalent to a 31.5% variance.”

The strength of diesel is such that there have actually been cases of cars increasing in value, while like-for-like petrol equivalents were simultaneously on the decline within the past 12 months, as Henstock explains: “The price trends generally move in tandem although there were instances of petrol values falling while diesel values were rising, in the spring of last year, for example.”

The opinion is virtually unanimous around the industry too, as CD Auctions Group’s managing director Roger Woodward explains: “I don’t see fleets turning away from diesel because their focus will always be on higher mileage, running costs and low driver BIK.”

Despite this, Woodward says large, petrol-engined vehicles shouldn’t necessarily be avoided, because they can be sold effectively and for good returns overseas: “Don’t write-off big-engined petrol cars. They usually go abroad – foreign buyers are good customers. and [large petrol-engined cars] often sell for well-above guide prices. There is strong demand for the BMW 7-series and Mercedes E- or S-class, but they need to be highly specced too.”

Even though diesel is the default choice for a lot of fleets, and has the benefit of stronger values, there are signs that the tide is turning. There is a case for petrol vehicles in the long run, at least according to BCA. The firm reckons that petrol fleet vehicles tend to retain more of their value over their working life, which can give them the edge over their equivalents on a long enough time span.

Henstock says when looking at the retained value over the typical 40-month working life of a volume fleet and lease car, the petrol car – perhaps surprisingly – is generally the stronger performer by one percentage point. In January of this year, the average diesel volume model retained 38.9% of MRP at time of sale, while the average petrol retained 39.8%.

“Some of this is undoubtedly down to the sharp divergence in the average mileage covered during that time. For petrol cars it is around 30,000 miles, for diesel cars the average is nearly double that figure. But with average diesel MRP being around £4500 higher than the equivalent petrol MRP, this tips the scales in petrol’s favour.”

It’s also worth bearing in mind the price premium for diesels and the point at which this makes sense for the end user. You only have to look at new city cars such as the Volkswagen Up and its Seat Mii and Skoda Citigo spin-off models – none of which are even offered with diesel engines – to prove that demand in this sector lies strictly with petrol.

Managing director of Arnold Clark Vehicle Management, Hugh Wallace, explains: “At the economy end of the market, diesel is not so attractive. Quite often the increase in price for a small diesel vehicle is not cost-effective, so this is where small petrol vehicles are still much more popular.”

There are also signs of the new breed of low-capacity petrol engines beginning to usurp some of the market share previously soaked up by diesels. The latter’s presence has dropped by a nominal but steady amount for the past three years, and it’s being attributed to the arrival of clean petrol units in small cars.

“Diesel-engined cars’ used car market share has dipped in recent years – down to 33% in 2012, from 34% in 2011 and 36% in 2010,” says Henstock, who suggests much of this will be down to fewer new diesel vehicles from 2009’s low actually reaching the marketplace and the fact that more private used car buyers are looking towards smaller, petrol-driven models.

Others are sceptical, but remain open to the idea that petrol vehicles may eventually surpass diesel in terms of RV strength. Woodward says: “There aren’t enough [new petrols] around yet and there do seem to be some issues with their fuel consumption in real-world driving. But I do think they are helping to raise awareness of the mileage debate: how far do you have to drive to make it worth paying the extra?

“A critical factor going forward will be the extra cost of making diesels comply with Euro6 emissions standards from 2014.”

Wallace makes the point that diesel-engined vehicles will lose the 3% benefit-in-kind penalty for company car drivers, which, while it is of a lesser consequence to corporate operators and used car buyers, still makes a stronger case for procuring diesel-engined vehicles from new: “The 3% diesel supplement is abolished in 2015/16, so from a driver’s perspective, diesel cars will continue to look like attractive propositions.”

He surmises: “In the short term, diesel will continue to be the preferred car for fleets, and there’s a growing appetite for used diesels with the general public, which will help to maintain strong RVs.

“In the medium term, it’s likely that new petrol technologies will tempt some fleets to switch back to petrol, but this will take a good few years to materialise. These new petrol cars are likely to be a little scarce for the first few years, which will help their RVs.”

The residual value expert’s view

The popularity of second-hand diesels is due to pretty simple factors, according to Andrew Jackson, head of analytics at Glass’s. He reckons that, among other reasons, used buyers just prefer them: “Buyers still remain keen on the diesel variants irrespective of the price differential,” he says. “It seems to be the case that the concept of mileage versus fuel efficiency is being increasingly won by diesel, as the concept of low mileage plus lower cost of ownership is not as emotive as higher mpg, which an equivalent diesel perennially offers.”

He advises businesses to keep their wits about them, though, and avoid bulk disposal of diesel-engined vehicles at the same time as competitors, which will shatter residual values: “[Fleets] need to look at the market activity of competitors and make sure they are not ‘following the crowd’. As we all know, too many of the same variant at the same time will reduce residuals.” 

The bigger picture, according to Jackson, is to consider the adoption of alternative fuels if it works for your business.

“Petrol and diesel fortunes are anticipated to remain the same for the next 12-24 months. Fleets would be wise to monitor hybrid and electric vehicle technology, as some of these models are becoming viable alternatives on a technical basis; however, RVs are still plagued by concerns surrounding battery failure anxiety as well as broader long-term appeal and viability.

“Considering the premium that has to be paid for such vehicles, it is understandable if companies are cautious about acquiring a large hybrid fleet. That said, Government policy and incentives are pushing this type of vehicle and some feel it will become an important market – the question is when rather than if.”