For years, diesel has been pushed as the go-to fuel for better consumption and low CO2, but it has come under attack lately for being bad for air quality.

Diesel has been promoted to such an extent that there is a general lack of understanding with consumers about the running costs of a diesel versus a petrol car, a decision that is ultimately down to the amount of miles a driver covers.

Petrol engine technology is also pushing ahead with ultra-efficient, downsized and turbocharged units making their way into a lot of manufacturers’ vehicle line-ups, but has there been an impact on the used market?

Diesels are still popular with used buyers, with the latest research from BCA’s annual Used Car Market Report showing that they represented 37% of the market in 2014, up 1% in comparison with last year’s report.

Diesels attract higher used values on average, but according to Simon Henstock, BCA’s UK operations director, when looking at the retained value over the typical 40-month working life of a fleet and lease car, petrol cars are generally the stronger performer by 1.7 percentage points.

Over the third quarter of this year, the average diesel fleet model retained 41.8% of the manufacturer’s retail price at time of sale, while the average petrol model retained 43.5% (see table, below right).
Henstock says: “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,” he continues. But it’s the higher up-front cost of diesel models that can really tip the balance towards petrol models come resale time.

The used car market has experienced a relative shortage of used diesels following the onset of recession because many fleets extended or deferred replacement cycles. That shortage means professional buyers have been bidding strongly, knowing they have an audience of retail customers ready and waiting.

BCA expects sales of used diesels to rise significantly in the coming years as the higher volumes sold over the past five years eventually enter the used car supply chain.

Low-mileage lower medium,  supermini and city cars are generally more popular with a petrol engine and it’s due to the type of used customer and the mileage they do. The lower the mileage, the more sense it makes to opt for petrol.

Jon Mitchell, sales director of the online remarketing company Autorola, says that anything from Focus size downwards is in high demand with a petrol engine.

“The dealers that buy the cars are confident about them as they know the consumer is looking for overall size, value for money and running costs and are generally not covering more than 10,000 miles per annum.

“The annual mileage is key and that is why fleet owners have always been keen to opt for diesel because of improved economy. The CO2 tax system has further influenced their choice, but if the tax system switched to a NOx-based system the swing to petrol would be more pronounced.”

Smear campaign

There has been an attack on the image of older diesel models by London mayor Boris Johnson, who wants to introduce a £10 penalty charge for non-Euro6 diesels by 2020.

But while that may have some impact on diesel’s reputation in London, particular with dirty taxis and buses, it is unlikely to have a radical impact on prices across the country.

According to Cap, there would only be a negative impact on diesel values if a similar scheme were rolled out to other UK cities.

Mark Norman, a senior consultant at the valuation experts, says: “Too few cars are affected by the current proposal to have any impact on the demand for diesel cars, whether or not they come under the scope of the envisaged daily £10 charge for entering central London.

“Car values are simply not that sensitive to localised factors, as we have already learned from London’s existing congestion charge. If they were we might have seen the values of electric vehicles rising in and around the capital but there is precious little evidence of any difference in residual values between different areas in the country.”

John McConnell, Lex Autolease remarketing general manager, says that while there is some strong competition between diesels and petrols on an mpg basis, it is unlikely consumer perception will be affected to the extent that there is an impact on diesel prices.

Rupert Pontin, Glass’s head of valuations, said the attack on older diesels is another way to justify greater taxation. He also believes that the risks of the impact of pollution on these older diesel vehicles were known when they were sold so it should not have been a surprise.

“Equally, as technology has improved and we have cleaner and greener engines, increased taxation to encourage buyers to move to a more modern car is welcome,” he says.

The residual value expert’s view

There are regional differences when it comes to valuations between diesel and petrol, with the former tending to make more money in the Midlands and the North.

However, Rupert Pontin, Glass’s head of valuations, says accurate information on regional price differences is difficult to pinpoint due to people buying online from all over the country.

As you would expect, cities and urban areas tend to prefer small petrol-engined cars for ease of use and whole-life costs.

The launch of new petrol technologies isn’t impacting on the used car market yet, according to Pontin.
He says: “Low-capacity engines with higher output are becoming more common, although at this point reliability concerns are rife from a trade perspective.

“These engines tend to work hard and there are examples where they are shown to be asking too much of a small engine. Volkswagen Group struggled with this when it launched the 1.4TSi engine some years ago. Therefore, trade buyers are cautious of these engines at the moment.”