Motor Industry News
May has been a month of instability across the UK car market. As a rule sales rates in the whole used car market have slowed. However late low mileage cars are still in demand, mainly due to lengthy lead times and retail consumers becoming increasingly impatient.
The retail sector has really felt the pinch this month, especially in the prestige sector, with many dealers reporting low forecourt footfall and a distinct lack of telephone enquiries. This has meant that many price reductions have been implemented to try and entice the customers that are actively looking to spend some hard earned cash. This has in turn meant that there are far fewer part exchange vehicles hitting the auction halls and appearing on used car displays.
For some time many dealer groups have been really concentrating on selling 'add-on' products rather than just the car. The profit gained from the sale of GAP insurance, paintwork protection packages and, more importantly, finance products, be it Hire Purchase or a Personal Contract Plan, really is the way to maximise profit. This is especially important in times when the profit margin in the car is ever dwindling. Due to internal pay structures and incentives, this can cause confusion at the point of sale where the emphasis is now moving more towards the sale of finance and insurance based products rather than the actual car.
Late low-mileage cars are still demanding very high prices as they have been over the last few months. But without a large deposit many buyers are unable to obtain finance as most lending organisations are using single source trade values which don't always correctly reflect the market. As a key industry figure told us recently: "It cannot be healthy for an entire industry to rely solely on one source of data. An alternative will help eradicate errors as well as enable us to create new opportunities".
VIP DATA looks at the big picture using trade, fleet disposal information and the retail market when establishing an accurate used car value, rather than focusing solely on auction prices which don't always tell the full story.
Some trends appear to be changing. Models such as Audi's Q5 and Q7 can now be sourced instantly with a little time and effort rather than waiting for the six month quoted build time. These cars are either dealer showroom cars that are due for replacement or orders where the customer has cancelled due to the lengthy wait. This will in turn mean that the late low mileage values will start to decrease to reflect the increased new car availability.
The last few weeks have seen Saab hitting major problems yet again. As we go to press production is still on hold due to financial difficulties as they desperately try to acquire additional funding to secure their future. Clearly this isn't the first time Saab has hit problems, however they have started to rebuild retail buyers and more importantly for them, the fleet companies' trust over the last 12 months, with new cleaner, yet powerful diesel engines which has gradually seen them appear back on company car lists.
However unless their funding issues are fully resolved, the long term impact on desirability and more importantly residual values, can only get worse.
The auction halls are stagnant at the moment, both in terms of stock and activity. There is an abundance of undesirable stock which is simply not selling. This can be due to a number of reasons. Firstly a lot of ex fleet and ex retailer stock that is sat waiting at auction for a new home is either poorly presented, in need of paintwork or had poor repair work. More importantly for the trade, the service history is often not present or incorrect and some examples are simply the wrong specification. A good example is an Audi Q7 with no satellite navigation which has a huge impact on its desirability and is worth up to £4,000 less than the sat nav model.
The poor standard of cars at auction combined with the lack of trade activity is only driving values one way.....down. At VIPDATA we are dropping our values for this month by between 4 and 5%. The large 4x4 sector is taking a harder hit as buyers become ever more conscious of fuel prices, running costs and pending interest rate hikes.
The trade is still recovering from a month of bank holidays and we are slowly getting back to normal before the start of the summer holidays. Used prices have dipped this month on average by 1.5%, with the main exception being Sprinter which has seen values increase by as much as 5% due mainly to the short supply of long wheel base models.
4X4 Pickups values have taken a tumble in recent months and have to be full specification and low mileage to achieve decent money.
Anything out of the ordinary, such as dropsides with a tail-lift or crane, or clean Defenders will make ready to retail money as long as they are sensible mileage.
24th May 2011
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