Diesels have high residual values

A recent study by European motor trade bible EurotaxGlass's indicates there could be a sound economic reason for buying a diesel-powered car rather than its petrol equivalent -- and it has nothing to do with miserly fuel consumption.

Contrary to predictions that a huge influx of diesel prestige cars in the European used-car market would adversely affect their resale values (in the UK alone, diesel car sales rose 145 per cent to 897,887 units in the decade from 1995 to 2005), EurotaxGlass's data suggests the reverse is true.

In fact, the raw numbers prove that the premiums being paid for used diesel-powered vehicles over their petrol equivalents have increased markedly over the past three years.

The EurotaxGlass's analysis compared the residual values of used prestige-badge petrol and diesel models of a similar specification, engine capacity and list price.  The company found that the price gap between a 12-month-old BMW 320d SE (diesel) and an equivalent 318 SE (petrol) has risen by 45 per cent, to £2175 ($5250 in our money), since May 2003. 

Similarly, the premium for a 12-month-old Audi A4 1.9 TDI SE (diesel) over an Audi A4 2.0 SE (petrol) has increased by 19 per cent, to £2150 ($5190) over the same period. 

True, the diesel models do cost more than their petrol counterparts in the first place, but this is more than recouped come resale time, according to the study. In the UK, the diesel Audi A4 has a list price £1490 ($3597) more the equivalent petrol model, while the diesel BMW 3 Series costs an extra £1810 ($4370) compared with its petrol sibling.

Perhaps not surprisingly, the same pattern was replicated for larger prestige cars. The EurotaxGlass's analysis shows that the premium for a 12-month-old BMW 525d SE (diesel) over an equivalent 525 SE (petrol) has risen by 36 per cent, to £2100 ($5070), since May 2003.  Meanwhile the price gap between a 12-month-old Mercedes E220CDi Classic SE (diesel) and a comparable Mercedes E200 Kompressor Classic (petrol) has increased by 46 per cent, to £2300 ($5554) during the same period. 

Richard Crosthwaite, Prestige Car Editor at Glass's, says higher levels of consumer demand has bolstered resale values of diesel passenger cars.

"Many more buyers recognise that diesel technology has moved on significantly over recent years, offering improved refinement, performance and economy, as well as strong residual values," Crossthwaite said. "Even though some of the premiums we see here will retreat over the coming years, diesel has become the first choice for many buyers and we consequently do not foresee any dramatic falls in their residual values."

Will the same trend be duplicated in Australia? It's a little early so say, as the diesel passenger-car segment is still in its infancy locally. However, the high take-up rate (around 50 percent) for diesel-powered variants of Volkswagen's Golf and the fact that several other manufacturers are jumping into the compression-ignition fray are proof that these vehicles are being increasingly sought after by buyers.

And you can rest assured the bandwagon will gather further momentum if petrol prices hit two bucks a litre, as is being predicted for the not-too-distant future.