Conversion rates remain
fragile in a quiet July.
Go deeper with GlobalData
Tim Naylor, who edits the
monthly Pulse report, looks at the latest set of BCA
figures for Motor Finance in terms of the wider
market
A number of different factors have
come into play in the used car market over recent weeks, all of
which might conspire to confuse the real picture of market
conditions.
Look at the headline average used car
value in isolation, which was relatively static in July compared to
June, and you could be forgiven for thinking it was just a
typically quiet summer month.
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By GlobalDataThe resulting modest average value
decrease in July, from £5,802 to £5,784 – a fall of just £18 or a
quarter of one percent – would hardly seem noteworthy particularly
as performance against CAP Clean increased marginally from 94.68%
to 94.83%.
However, for the second month running,
a relatively rich mix of cars has disguised some of the pressures
in the marketplace. Firstly, the fleet and lease sector took most
of the pain during the past 30 days, with average fleet values
falling by £276 in July, equivalent to a drop of 3.7%.
Secondly, conversion rates remain
fragile and are well down on those seen earlier in the year. There
is more stock available in the market, combined with slightly
softer buying power, and simple supply and demand economics do the
rest. Despite this, sold volumes in the fleet and lease sector
actually increased by just over 1% in July compared to June, which
suggests volume vendors are happy to take the best bids in the
current market when they can.
Demand is there for vehicles that are
valued in line with their condition and market expectations, but
there is more pressure on higher valued vehicles. As a result, the
more expensive premium fleet models fell by £417 (3.8%) from
£10,866 to £10,449, while volume models dropped from £5,509 to
£5,425, a decrease of £84, or 1.5%. In contrast, budget fleet/lease
car values rose from £3,172 to £3,359, a substantial 5.8% increase,
with the caveat that numbers are low in this sector and model mix
has a disproportionate effect on value.
Up to one year
old
The late year, low mileage sector has
one over-riding factor in its favour and that is scarcity. While
new car volumes remain depressed, even accounting for the recent
upward revision of the 2010 estimate by the SMMT, young used cars
will remain a rare commodity. In addition, BCA has staged a number
of specialist sales aimed at supporting some niche areas of the
market. Performance coupes, convertibles and roadsters, for
example, have proved very successful in generating strong support
from buyers.
As a result the values for coupes,
convertibles, roadsters and 4x4s up to one year old all rose in
July by at least 2% and up to 9%. Nearly all body shapes under one
year outperformed CAP by often significant percentages, with only
mini-MPVs and small saloons failing to sell for average values
equivalent to 100% or more of CAP Clean. Larger hatchbacks and 4x4s
were the star performers, averaging 116% and 114% of CAP
respectively.
One to three years
old
For the third month running, greater
evidence of price pressure can be seen in the one to three year old
sector – with most average values in decline over the month. The
exception remains those desirable niche sector models such as 4x4s,
coupes, and convertibles that were often featured in premium car
sales during July.
Three to five years
old
Overall values for volume stock aged
four to five years old – saloons, hatchbacks, MPVs and estates –
moved very much in line with the one to three year old market and
are down a few percentage points against last month. Strongest
performers were small hatchbacks and small MPVs which recorded
month-on-month values in excess of 99%.
If this sector has an issue, it is
that the stock is not quite old enough or cheap enough to attract
the budget buyers. Demand at that end of the market is lively and
while values are relatively low, competition is high for the best
examples.
