Data gathering and analysis to improve the understanding of 2nd hand car and LDV markets and implications for the cost effectiveness and social equity of LDV CO2 regulations

CE Delft teamed up with TML to conduct a study on the 2nd hand market in cars and light delivery vehicles (LDVs) in Europe, commissioned by the European Commission. The aim of the study was to improve understanding of this market, particularly with respect to the cost effectiveness and distributive effects of the European CO2 emission standards for cars and LDVs.

One key finding of our study was that, on average, vehicles with lower CO2 emissions fetch a higher price on the 2nd hand market, allowing the additional cost of a fuel-efficient vehicle to be partly recuperated. As a result, it is not only buyers of new cars and LDVs who pay for the higher purchase costs of low-emission vehicles, as some of this additional price is paid by 2nd hand buyers. On balance, though, the CO2 standards lead to greater benefits for the owners of 2nd hand vehicles, because savings on fuel costs weigh up against the higher purchase price. For buyers of new vehicles this is not the case and there are consequently net costs for buyers of low-emission vehicles.

In this study we also assessed the average socio-economic profile of owners of 2nd hand vehicles and found that those from low-income groups are more likely to own a 2nd hand vehicle than those with a higher income. In combination with the above results, this therefore implies that lower-income groups benefit more from the CO2 standards for cars and LDVs than higher-income groups.

Finally, we also considered the geographical profile of the 2nd hand market. The main conclusion was that in Eastern Europe the 2nd hand vehicle market is far larger than in Western Europe. New vehicles are thus sold more in Western Europe and are then partly exported to Eastern Europe. As a result, a larger share of the financial benefits of the CO2 standards accrue to Eastern Europe.