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‘Business as usual’ for now – but used car market change is on the way,

Home / News / ‘Business as usual’ for now – but used car market change is on the way,

…say the experts at CAP Automotive who are warning that market stability during the first half of 2013 will almost certainly be undermined by the on-going level of pre-registration activity as manufacturers continue to drive new car volume in the UK market.
Reporting on market conditions at the end of November, Black Book Live notes that the weekly fluctuations in trade values over the course of the month have largely been in line with typical winter seasonal performance.
Fuelled by a level of retail consumer demand on the forecourt that has remained constant all year, dealer appetite for high quality 3 year old cars in particular is strong. But those ‘ready to retail’ cars are increasingly rare as the market is flooded with ex-fleet cars up to 50 months old and with high mileages. Those cars attract high preparation costs for dealers, which eats too far into margins for comfort.
These factors are reflected in the auction hall where some cars that failed to sell first time are being re-entered anything up to 4 times before an acceptable bid is received.
However, dealers are still buying stock in preparation for the traditional January surge in retail activity, according to Black Book Live.
But there are signs that CAP’s original expectations that trade prices would perform strongly until at least the middle of next year may now have to be revised.
CAP’s Mike Hind said: “Our view now is that the only restrainer on a substantial rise in values during the first part of 2013 is pre-registrations and the pressure on prices created by a super-abundance of late plate cars.
“While we continue to expect prices to rise into January we are no longer as confident as we were that values will continue to increase into the summer.
“This may be good news for hard-pressed dealers but fleet and contract hire disposers – and anyone else selling their cars into the trade – need to be aware that the on-going level of pre-registration activity will inevitably impact throughout the market.
“To put it in plain language, we are fast approaching the point where there is nowhere for late plate values to go without forcing a reduction further down the age bands. Looking at the state of the Eurozone economies, we see little likelihood of the pressure on Britain to soak up this new car supply easing any time soon.
“We are not being alarmist about this, because our view is that manageable levels of pre-registration are a perfectly sensible approach to car retail. Not only does it keep people in work throughout the new car supply chain, but provides consumers with genuine value for money choices.
“Nor do we argue that rising used car trade values are automatically good news because, for dealers and consumers, a rising market simply means a more expensive market.
“But we do believe that price stability is desirable because it makes trading for everybody much smoother and enables a much clearer view of risk for all the businesses, from contract hire operators to insurers and banks, who are exposed to it.
“A rise in the volume of late plate stock is not the end of the world but after the stability of this year a return to the old norms of high depreciation will certainly come as a shock to the system. Suffice to say, this is one area on which we are keeping a very close watch.”
ends
For further information contact Mike Hind, Communications Manager – CAP
Tel: 0113 222 2044 / 07710 152030
Twitter – @MikeH_CAP