Used car valuation specialist CAP says a
tougher market and expanding costs are increasing the risk of
business failure for second-hand motor dealers currently employing
a strategy of competitive pricing.
According to CAP, publishers of the Black Book
of second hand vehicle information, the price of used stock is
rising, putting pressure on dealers’ margins from February
onward.
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Meanwhile, at a recent roundtable hosted by
Motor Finance and to be
summarised in February’s issue of the magazine, finance
brokers, lenders and dealers instead advised those in the used car
market to concentrate on good purchasing, rather than pricing.
Several spoke of their frustration with value
guidance, including book prices, auction prices and the difference
between CAP and Glass’s estimations, which one attendee found to be
£1,000 different on some vehicles.
Hope for the best
The general consensus of those at the
roundtable was for those in the market to make the most of their
judgement, and experience of the forecourt, rather than relying on
the book price.
The used market, which considers vehicles to
be of prime quality around three years of age with less than 10,000
miles on the clock, is suffering from a supply crisis following the
downturn in new registrations in 2008/09.
As such,
dealers are travelling further and competing harder to acquire
new stock or must spend more to get vehicles up to a sellable
standard, say CAP.
However, some attendees of the roundtable said
they had been taking stock received through voluntary terminations
rather than selling them to auctioneers for a received price. Given
the stock problem, they argued, strong prices are still achievable
simply by using classified second-hand car dealer advertisements as
a guide price.
While those representing the dealer groups
said the flat market could even help dealers charge what they
could, finance providers at the roundtable noted that this was why
their margins had come under such pressure.
The bottom line for attendees was that healthy
margins were still achievable in used cars as long as a company did
not burden itself with the over-purchase of stock.
CAP has also launched an enhanced version of
the Black Book in a joint venture with vehicle checker HPI to give
purchasers a 15-month span of value for a vehicle (the previous
year plus three months’ forecast).
Fewer vehicles, more
information
Both the Vehicle Remarketing Association and
CAP reported that
autumn used car prices were less volatile than those of summer,
followed by a
drop in value of only 1.8% in winter, when prices would
normally plummet.
British Car Auctions (BCA) even reported a
value rise of 4% in December, with the average value of a
second-hand car reaching £6,451.
Certainly, the start to 2012 has seen strong
values in second hand vehicles, such as the special January auction
held by British Car Auctions and Lex Autolease which reported
nine-tenths of vehicles making 99% of their CAP value.
Of note at the auction, online bidders
outnumbered attendees 533-to-300. CAP has previously reported
internet “cherry picking” of the best deals by independent
purchasers, further pressurising dealers’ profits in an open
market.
The launch of the CAP HPI Black Book+ will add
to the value information available to all purchasers – independent,
group, franchised, wholesale – and is another tool among several
made accessible recently.
HPI and
ATD Solutions have both released cross-matching vehicle
information software since the New Year, giving second-hand car
buyers access to more information than ever and keeping prices
competitive.
The latest Motor Finance roundtable will be
published in
February’s issue of the magazine.
richard.brown@vrlfinancialnews.com
