Fleet News

Brexit delays damage fleet confidence - Cazana

Rupert Pontin

Author: Rupert Pontin, director of valuations, Cazana

March is the largest monthly market for new car registrations in the trading year and the new plate is usually cause for celebration.

This year the volume of registrations was down by 3.4% in comparison with the same period last year, taking the year to date drop in new car sales to 2.4% less than in 2018.

The slight boost in overall registrations experienced in February 2019 seems to have been short lived.

For the fleet sector, registrations were 0.3% better than the same period last year and with a market share for the month of 48.7% the sector is 1.7 percentage points stronger than in March 2018 and for the year to date, 0.8 of a percentage point higher at 50.5%.

Brexit - further delays bring greater concern

Ultimately, this new car position has been a disappointment for the fleet sector amidst hopes that the economy would see an upturn as Brexit was settled and commercial activity nationwide could shakedown allowing businesses to begin to plan on the understanding that the economic position had been quantified.

This has not been the case and further delays have brought greater concern and instability in a month when there was an expectation of a release of pent up demand and an increase in registration activity.

At least the danger of market wide new car price increases that would have come into play had there been a no-deal Brexit have passed for the time being.

The need to alter both pricing and forecasting models has dissipated for a while.

On a more positive note new car supply has been much better and lead times for key models affected by WLTP are improving.

However, for those models in ready supply deals have been creeping up again and there has also been a return to pre-registration for some brands.

Lower volumes of cars registered now will bring a positive when they defleet in a few years’ time as the residual value in the used market is likely to be stronger than perhaps expected and indeed calculated by those still working with subjective, manually edited forecast data.

It is important to remember that at the moment overall business confidence is not great as it could be and this is shown in the chart below:

Fleet performance

Moving to market performance and this month’s focus is on the premium upper medium sector that has been one of the key market profiles for some years.

Dominated by the premium German manufacturers, volumes returning to the market continue to increase monthly and this sector is a key barometer for the overall health of the used car fleet market.

The last month has seen BMW launch the new 3-Series to fleet buyers and the take up appears to have been strong for a car that has arguably already been a market leader for some years despite its age.

However, and perhaps somewhat controversially, the Mercedes C Class was recently voted the best car in this sector by industry motoring pundits.

From a used car market perspective, the retail consumer has an affinity with this aspirational tranche of the industry and demand has remained firm although anecdotal reports of pricing weakness have also been rife for ex-fleet cars.

The chart below looks at the retail pricing performance of a three-year-old, 60,000-mile car in the consumer market over the last 12 months:

Data powered by cazana.com

The Audi A4 - a standout performer

This chart is interesting because it shows that the only model range on an upward trajectory is the Audi A4 which has improved its retail pricing performance by one percentage point over the last 12 months.

This is possibly due to the fact that the whole Audi A4 range may have seen a positive impact on used car retail prices driven by the rarity of both late plate and new cars off the back of the WLTP production shortage.

Of the remaining three cars the movements vary between 2.6 to 5 percentage points downwards and this may come as a surprise to many.

The composition of data here will also have an impact as this looks at both diesel and petrol models combined but never the less remains an interesting view of the market.

The heavier decline in Mercedes C Class retail pricing is likely to be linked to volume as the brand has been pushing hard in the new car market in recent years and this will have resulted in not only greater volume but in all likelihood lower priced run of the mill models hitting the used market in greater numbers.

This is supported by the average new car price of the Mercedes C Class data in this analysis having remained largely the same whereas for the other 3 brands the cost new has increased by between 7 and 10 percent.

The downward movement in retail pricing experienced by the Jaguar XE and BMW 3 Series are more in line with annual feet market depreciation expectations.

As such it is clear that care is needed when looking at remarketing in this sector and real time insight will help ensure the best return on investment.

Used cars - a summary

To summarise, the March market has been difficult from a new car perspective but manageable from a used car point of view.

Used retail consumers are still online and walking on to the pitches but the sales process has become harder as a result of a lower level of confidence.

Dropping the retail price does not help but helping the buyer feel comfortable is the key.

Thankfully the used car market appears to have greater strength than general retail markets which is a big positive.

This means that where there may be pockets of difficulty in the wholesale market, generally speaking trading should be good as the retail demand needs to be satisfied.

Making the most of the opportunities is key and only truly achievable using real time retail driven data to understand where the market is at a given time and therefore how wholesale buyers will be able to retail price and sell the cars you are remarketing to them.

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