The used car market is expected to remain
steady over winter, with values dropping by less than usual for the
time of year, according to remarketing experts.
The December edition of used car pricing
organisation
CAP’s Black Book predicts a drop in trade values of only 1.8%
while the Vehicle Remarketing Association (VRA) attributes the
relative quiet in the market to lower stock and demand in the
approach to Christmas.
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According to CAP, the weak market for new cars
has led to a diminished quality of used vehicles and more
competition between independent and franchised dealers.
While some dealers are willing to pay higher
prices, others are tolerating greater wear and tear of vehicles
with increasing numbers of vehicles available with missed routine
service and maintenance intervals, and recovery companies reporting
more breakdowns. As such, the VRA advises its members to factor in
the cost of repair to prices.
A recent survey of over 100 dealers conducted
by CAP reported 73% of independents and 59% franchised dealers, who
have first pick from manufacturers’ used stock, have problems
sourcing retail-quality stock. Four-fifths of independents and just
under half of franchised dealers said their used vehicle stock was
too low.
The VRA also reports that dealers are hanging
on to “a significantly higher proportion of their part exchanges”,
as demand rises for older vehicles, evidenced by a 75% conversion
rate at auction for five- and six-year-old vehicles, above the
current overall average of 65%.
Late to the plate
Late year vehicles with low mileage are at
risk of losing value again after recovering since the recession,
the VRA believes, as customers are tempted by manufacturers’ recent
new car offers.
Black Book Editor, Mark Bulmer, agrees: “Much
will depend on the behaviour of manufacturers in relation to
pre-reg and late plate supply. One major volume player has a vast
quantity of metal to shift which, at recent rates, could take up to
nine months to move on.
“In general there is a lot of late plate stock
around and this was illustrated recently when scrutiny of one major
trade and retail website revealed 88,000 cars available up to one
year old.”
In part, CAP attributes the reduced quality of
vehicles available to fleets’ take up of manufacturers’ offers and
pushing ‘tired’ cars into second-hand retail.
The VRA notes the combination of schemes such
as cash for cars and reduced fleet sizes (as result of a reduced
workforce) have seen a 5-10% reduction in ex-corporate cars,
overall, in the second-hand market.
VRA
members still predict a strong wholesale market in December
with dealers, who remember the problems of insufficient cars at
retail at the start of 2009, stocking up ahead of an expected rise
in prices in January and despite concerns over late plate and
pre-registering supply levels.
richard.brown@vrlfinancialnews.com
