The effect of company cars upon the secondhand market

The report is concerned with the effects that the provision of cars by companies may have on the non-company part of the car market. Such effects can be expected because of the large numbers of company cars which are sold to private motorists after a few years. The subject is explored using a model of the car market which reproduces the age and price distributions of cars, and the income distributions of the households that own them. The consequences for the rest of the car market of a hypothetical reduction by a half of the number of company cars are examined. It is shown that, if one assumes that the number of cars in use and average household expenditure on car purchase remain as before: (a) depreciation rates of car prices would fall; (b) the average age of cars would rise; (c) the number of new car registrations would fall; (d) the average value of cars in use would hardly be affected. A number of other consequences are also given and the sensitivity of the results to some of the input assumptions is tested.