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Low CO2 cars have better residuals

Research by the Energy Saving Trust has concluded that graduated VED (car tax) may be more effective at influencing a shift to lower CO2 cars than previously thought. By analysing the premium that customers will pay for fuel economy when buying a used car they were able to model the effect that increased VED would have on the costs of leasing a new car.

Key findings of the study were:

  • Faced with two comparable three-year-old cars, customers place a higher value on the car with better fuel efficiency.
  • The factors varied by model and doubtless reflected that some diesels are more refined and more popular than others, but the average was a factor of 1.8. That is to say that for every potential saving in fuel costs of £100, the market was, on average, prepared to pay £180.
  • Using this factor, a VED increase of just 1% of the purchase price can increase the cost of ownership of a new car by 12%.
  • This increased cost would, in many cases, be high enough to move buying patterns from high CO2 cars to lower CO2 cars.

The study shows that choosing lower CO2 emitting vehicles helps to ensure improved residual values as the used car market becomes increasingly concerned with fuel consumption. Higher residual values also translate into lower leasing rates further incentivising lower CO2 cars. At the same time drivers of low CO2 cars enjoy reduced VED, reduced fuel costs and often reduced purchase and insurance costs too.

Buying a low CO2 car saves you money throughout the life of the vehicle, to find out which is the lowest CO2 option check out the Green Car Guide ebook. Updated monthly the ebook provides a comprehensive list of over 60 reduced CO2 cars in 10 sectors (City Cars, Sperminis, Small Family Cars, Executive Cars, MPVs, Estate Cars, 4x4s, Open Top Cars and Sports Cars).