Has the Ultra Low Emission Zone Caused Diesel Car Prices to Collapse Yet?

Number of Diesel Cars in London Not Meeting European Emission Standards

Data obtained from the DVLA/DfT indicates that a whopping 673,554 diesel cars in London as of Q3 2018 were first licensed before September 2015 and likely don't meet European emission standards. The number of diesels not meeting emission standards represents 81% of all diesel cars in London, or 25% of all cars in the capital. In some boroughs the numbers are even higher. For example, in Barking and Dagenham 89% of all diesels exceed emission standards, representing 31% of all cars in the borough.

As of the end of September 2018, there were nearly 674,000 diesel cars in London exceeding European emission standards

While many of these owners might be hanging onto their diesel cars because they don't often drive in the current central London ULEZ zone or they benefit from the temporary residents' exemption, in October 2021 the zone expands to include all or part of 23 boroughs—and residents will no longer receive an exemption. To see how many cars might be affected, here's the breakdown of the total number of cars, total number of diesel cars, and number of diesel cars first licensed pre-September 2015 in each London borough:

Boroughs in bold will be included (in whole or in part) in the expanded zone from October 2021. In those boroughs, there are 422,587 diesel cars not meeting European emission standards, representing 63% of the non-Euro 6 diesel cars registered in all of London.

How Much Have Diesel Cars Near London Depreciated So Far?

To find out if used diesel car prices have experienced downward pressure yet, we gathered used car price data for the UK's three most popular cars—Ford Focus, Vauxhall Corsa and Volkswagen Golf—to see how diesel depreciation compares to petrol. Our analysis showed that older diesel cars have already depreciated more than comparable petrol cars—but the amount varies by make and model. For example, 2014 diesel Ford Focuses have depreciated an additional 4 percentage points more than petrol; diesel Volkswagen Golfs have depreciated an extra 10 percentage points more than petrol.

Diesels have depreciated marginally more than petrols

We expect diesel prices to continue to depreciate faster than petrol prices. As a large portion of the 674,000 London diesels that don't meet European emission standards will likely be up for sale over the next two years, used diesel car prices are likely to continue to drop.

Methodology

In order to gain a better understanding of the number of diesel cars in London that may be affected by the existing Ultra Low Emission Zone and the expansion of the zone in 2021, we analysed data on the number of pre-September 2015 diesels in each London borough which we obtained from DVLA/DfT and also gathered data on used car prices near the capital.

To see how used diesel car prices have been affected by the introduction of the ULEZ, we compared diesel depreciation to that of comparable petrols for the three most popular cars in the UK: Ford Focus, Vauxhall Corsa and Volkswagen Golf. We analysed the 2014 model year, since that is the most recent full model year in which diesel cars would likely not meet emission standards and be subject to the £12.50 ULEZ charge. (Most diesel cars registered before September 2015 will be subject to the £12.50 ULEZ charge.)

We further narrowed down our analysis by considering cars within 100 miles of central London, as those further afield could theoretically be less impacted by the ULEZ. We assumed that people are willing to travel up to 100 miles to pick up or deliver a car.

To estimate the amount of depreciation, we compared 2014 list prices from Parkers to the average price of used, 2014 model year cars listed for sale on AutoTrader—both diesel and petrol cars. Whilst this may not produce an exact value for each car's depreciation (we don't know each car's actual, original purchase price), we assume it gives a fair representation of the depreciation and most importantly allowed us to compare diesel vs. petrol depreciation.

Here are specs of the cars analysed: