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Is my diesel car a financial ticking time bomb?

The UK Government has announced its plans to ban diesel and petrol cars, and in doing so has left motorists facing a dilemma about what to do with their ‘dirty’ diesel cars.

As part of a package of radical measures that formed the Government’s clean air strategy, it’s headline announcement focused on ending production of diesel and petrol cars by 2040 – effectively sounding a death knell for the internal combustion engine as we know it.

While proposals for government-funded and mandated clean air zones – involving charging the most polluting vehicles to enter areas with high levels of air pollution – and the controversial scrappage scheme did not receive approval, the door has been left open for future implementation.

The decision to introduce clean air zones has been left to local authorities, which if given the go-ahead could include financial penalties imposed on diesels or bans on certain types of vehicle.

So with the Government’s air pollution plans now clearer, what does it all mean for the diesel car owner?

With diesel cars coming under increasing attack from campaigners and legislators, does owning a diesel car mean you are sat on a financial ticking time bomb and if so how can you diffuse it?

Traditionally diesel cars have proved a better investment than their diesel counterparts having on average always retained their residual value better. This has always been due to lower fuel economy and historically lower car tax rates.

However changes in vehicle excise duty introduced in April 2017 equalised this long held advantage for diesel cars. Unlike the old system where low-emission petrol and diesel cars were tax exempt, the new rules mean it will only be free for those vehicles with no tail pipe emissions – electric and hydrogen cars only.

Diesel owners will get further hit in the pocket from October this year, when the T-charge takes effect in London. Introduced by London Mayor Sadiq Khan, the T-charge means you will have to pay £22.50 a day to drive an older car in London.

While not exclusively aimed at diesel cars – older petrol and hybrid cars will also be subject to the charge – it will still directly impact diesel car owners with further charges in the future set to mean more misery for diesel drivers.

In 2019, when the T-Charge is replaced by the Ultra Low Emissions Zone (ULEZ), diesel cars which don’t meet the Euro 6 emissions law standard will be subject to an increased charge of £24 to enter the ULEZ. In a further blow, diesel cars over four years old – even if they meet Euro 6 regulations – could also still be liable for the £24 charge.

If the London T-charge or ULEZ example is adopted by other large cities and towns across the UK, the cost implications for diesel drivers could become even greater with large parts of the country becoming potential ‘no-go zones’ for those motorists looking to avoid paying the charge.

Next up is the Government’s proposed scrappage scheme, designed to take 15,000 diesel and older petrol cars off the road by replacing them with electric cars.

A decision on introducing the scrappage scheme has been deferred to the Autumn but if given the go -ahead could add a further financial headache to drivers already dizzied by the diesel dilemma.

It’s been estimated that thousands of pounds could be wiped off the value of diesel cars if a scrappage scheme is introduced, with a lack of demand for diesel cars leading to a depletion in the value of the product.

Maximilian Vollenbroich from Carspring believes the scrappage scheme will make the value of diesel cars deplete significantly. 

He said: “There will be a depletion of residual value of diesel cars that just fall outside of the scheme. “Residual values of used diesels could drop over time if they are phased out

“In terms of attractiveness to buy, they will move to the bottom. Those are the ones that should trade at a discount.”

The diesel dip is already being felt in the market with sales of diesels in 2017, down on previous years. Figures from respected Automotive industry body, the Society of Motor Manufacturers and Traders (SMMT), reveal a 4.8% drop in new registrations for June this year – with 243,454 in 2017 compared to 255,766 in June 2016.

What Car? editor, Steve Huntingford, said: “There appears to have been a dramatic shift in the petrol and diesel sales seesaw.

“In the 2000s, legislation changes resulted in a diesel boom but after last year’s revelations and the emergence of extremely efficient downsized petrol engines, the tide has now turned.

“Car buying is usually determined by the financial aspects of the purchase; if buyers fear a diesel crackdown and petrol engines are cheaper to buy while being almost as efficient, it’s easy to understand the changes taking place.”

So back to the original question of whether my diesel car is a ticking time bomb?

Diesel cars are undoubtedly being subjected to a range of pressures – legislation, charging and other punitive measures, market forces – that make them a less attractive financial proposition than in the past.

While the evidence is showing a dip in a diesel sales, it’s not currently a plunge and the relatively low level demand for alternatively fuelled vehicles indicates the immediate demise of diesel cars is yet to materialise in the market.

In summary if indeed your diesel car is a financial ticking time bomb, all the evidence currently suggests it’s on a slow fuse but one that needs watching carefully to ensure that it doesn’t end up blowing up in your face in the future.

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