Motor Industry News
Early 2011 showed promising signs for the UK motor industry. It was generally thought that due to supply restrictions from manufacturers, used car values would climb month on month. Quarter One was a wonderful start in terms of both market performance and a general feel good factor in the market place as a whole. The good feeling helped to boost the used car market further as traders weren’t as concerned about being stuck with unsold stock for two or three months.
However in recent months things have changed for the worse. But what exactly has fuelled the decline?
- The extended bank holidays and the Royal wedding at the end of April caused the whole country to have a change in mind set which took focus off the industry as a whole. April is regarded as the turning point for the previously strong used car market.
- The motor trade is a very sensitive business. As soon as traders can see that there are a lot of unsold cars on the market, they are a lot more selective on what stock to buy. Auction halls saw less and less people attending and more importantly buying.
- We have started to see a lot of ‘bad’ stock appearing at auction. The economic crisis of a few years ago has started to raise its ugly head in the fact that a lot of poorly maintained and unloved cars started appearing for sale and either not selling or selling for far less than a ‘ready to retail’ car.
- Some trade guides may have a lot to answer for. Their bullish tactics when delivering used values sometimes inadvertently show artificially high prices. Leasing companies, dealer groups and the trade in general use these guide prices as a benchmark when selling through various sale channels and if the guide prices are too high, then the cars won’t be sold. So therefore this only increases the number of cars at auction and boosts uncertainty in the used market.
In recent months we have seen various auction groups offering guide prices printed on their sale catalogues. With auction companies now trying to grab a wider audience including primarily private individuals, this may seem like a great idea to increase transparency in the auction halls and will undoubtedly set a private buyers mind at rest, but is it a good idea? There is an argument that no matter what the figures say on the auction catalogue, a private buyer will almost always have done their homework on the internet and buy at a figure that they are sure to be making a saving on retail at. The printed figures are sure to have one particular negative effect, and that is directly on the trade guides who will lose revenue due to the readily available figures.
Elsewhere in the industry throughout June we have seen the usual trends continuing in the marketplace. Only the best, late low mileage stock is selling at a reasonable price. Early in the year retailers in particular were still buying cars that needed preparation such as tyres, paintwork etc. in order to reach retail standards. Now the same car is just not desirable. Preparation needs to be limited to perhaps just a couple of alloy wheel repairs or similar for a car seen at auction to make good money. Perhaps the biggest change to be seen over the last 4 to 6 weeks is to the regular over achievers such as Audi’s Q5. Up until very recently these were being sold for often over list price even at 12 months old. The dealer groups were actively seeking these cars both in regular and closed auctions knowing full well that a new example couldn’t be found and the retail customers were chomping at the bit to get into one without the wait. This trend has slowed somewhat as a new Q5 can be found for virtually immediate delivery.
With this in mind and the continuingly slow used market, we have reduced our used car values by an average of 4% for July. There are some exotic models that don’t fall into this category such as the Ferrari 458 Italia which continue to perform particularly well in today’s market.
July and August are historically slow months in the motor industry as many people dig deep and head off on their well-earned summer holidays. Some new car buyers will also wait for their new vehicle to be registered when the new plate comes on the 1st of September which consequently has a knock on effect on clean part exchanges coming into the market. Over the next few months we may see a continuing reduction in Residual Values…..more to follow….
The used van market is starting its annual slowdown with most traders only buying directly for an end user or taking a chance as long as it’s cheap. There is a good supply of stock throughout the market at the moment. Traders who are smart and can afford to perhaps sit on stock for some time should buy now in preparation for the next few months when historically good clean vans are in short supply.
Out of the many smaller used vans available at the moment it seems that clean examples with less than 70,000 miles are becoming increasing difficult to find. The facelift Citroen Berlingo stands out from the crowd and its values are remaining strong as a result. VW Caddy is also proving to be a good performer but primarily only in white.
Ford Transits are still plentiful in the larger van market with some of the pre facelift 2006 variants demanding more money than the early facelift models. This is partly because of some reliability issues being talked about on the facelift models. In recent months there have been a number of LDV Maxus around from a large rental company, these are now starting to dry up.
We are still seeing the usual culprits performing well. Mercedes Sprinters with low mileage are a good find, as are VW Grafters following a wave of stock that was out there now drying up. There are some high mileage examples out there that have been well maintained and are very clean.
Values are dropping but not to the same extent as the car market. As a result we have dropped LCV prices by 1% for July. One exception is the VW Crafter which due to its particularly strong performance has been raised by 2.5%.
28th June 2011
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