It said used sales have suffered a worse than expected seasonal downturn at the tail end of 2007 with the UK credit squeeze resulting from the struggling US market a major factor.

While EurotaxGlass's said it was impossible to predict the far-reaching effects of the squeeze, it said UK lenders were already applying more stringent terms to their loans and increasing monthly costs.

APR lending rates have typically increased by 2 per cent for a three-year loan period over recent weeks, EurotaxGlass's said, which was affecting consumers' disposable income and confidence.

Managing editor Adrian Rushmore said that while interest rate reduction would improve the used car market, a quick return to the robust levels of 18 months ago looked “extremely unlikely”.

Even relatively well off consumers would be less confident about spending because their money will be held in check by a stagnant property market.

But Rushmore pointed out that last summer's fears that the five interest rate hikes since August 2006 would adversely hit used sales proved to be unfounded.

The resilience of the new car market in 2007 was another positive factor he pointed to, saying sales were “almost certainly going to be up”.

Due to a slight slump in the new car market in 2005, however, EurotaxGlass's said the size of the three year old car parc, some of which will be due for replacement, could be smaller in 2008 than previous years.

A potential downturn in retail demand could also reduce the number of cars part-exchanged.

EurotaxGlass's reported that both the major auction houses have been seeing rising prices for both dealer part-exchange and fleet cars, quarter-on-quarter for the last two years.

It said this trend might continue into 2008, but that it was important to realise that the used price rises had been driven by increasing new prices.

EurotaxGlass's advised dealers to “tread with caution” until there was less uncertainty facing consumers.