Rupert Pontin, Chief Car Editor at Glass’s, comments on the position of the retail car market.

In previous years, November has been a month of impending doom and gloom with trade and retail buyers starting to focus on the month of December and festive fun. Retail buyers have wanted to spend money on anything but cars with the added disincentive of poor weather keeping them from plodding around cold, damp and dismal forecourts looking at cars in the wind and rain. The trade looked to lighten their stock load and pull back on purchasing, often for accounting reasons, to ensure that at year end stock is low; cash is high and the bean counters happy in readiness for a return to the New Year market.

However, the profile of this year’s car market has been completely different and therefore it is logical to deduce that this November will paint a far better picture than has previously been seen. For a start it would appear that the country may be turning a corner from an economic perspective, with recent reports showing not only increased consumer confidence but factual evidence of continued PPI pay-outs and a surge in the number or mortgages being taken out.

Money seems to be more available. Finance companies report greater take up of their products, albeit incentivised by low finance rates, but the very fact they are able to do this demonstrates a greater availability of the cash needed to boost sales. Even subprime finance companies indicate that there is greater interest and a higher rate of applications, despite what many have previously considered as prohibitive interest rates.

Therefore the key for the trade is to identify where the market really lies and to find a way of maximising on it to ensure the highest levels of interest and subsequent sales success. We see that seasonality in the convertible and 4x4 markets is far less permanent than in years gone by, and small cars are performing exceedingly well for running cost reasons. For reasons stated earlier families also appear to be in the market too. The question is, what stock will turn fastest and give the best return?

Table 1 shows the top 10 best-selling used cars by average days to sale (measured as days listed) for the month of September :-

Make	Model	Market Category	Av. Days to Sale
Ford	B-Max	Compact SUV	32
Land Rover	Discovery	Premium 4x4 SUV	34
Land Rover	Discovery 4	Premium 4x4 SUV	34
Peugeot	307 SW	Lower Medium Cars	35
Citroen	C4 Picasso	Compact SUV	36
Volkswagen	Eos	General Market Convertible	36
Mitsubishi	Lancer	Lower Medium Cars	36
Jeep	Patriot	4x4 Crossover SUV	36
Audi	A4 Cabriolet	Premium Upper Medium Convertible	37
Kia	Sportage	4x4 Crossover SUV	37

Table 1 paints an interesting picture with four of the top 10 cars resting in the 4x4 category with an even split between premium and lifestyle market sectors, confirming both the desirability and supremacy of Land Rover in its market and the importance of (what are often termed as) crossover cars that show an aspiration of premium SUV ownership. There are two slots going to the convertible market which would never have been the case in September in previous years, and the remainder of places go to family cars.

Also to be contemplated in the mix are the slowest selling cars by average days to sale that are shown in table 2 because there are also some surprises here :-

Make	Model	Market Category	Av. Days to Sale
Lexus	CT 200h	Premium Lower Medium	72
Subaru	Legacy	Upper Medium Cars	75
Mercedes-Benz	S-Class	Luxury Saloon	76
Chrysler	Ypsilon	Small Cars	76
Hyundai	Coupe	General Market Coupes	79
Subaru	Outback	Upper Medium Cars	84
Nissan	Leaf	Small Cars	92
Ford	Streetka	General Market Convertibles	101
MG	TF	General Market Convertibles	106
Mercedes-Benz	R-Class	Premium 4x4 SUV	139

Of specific concern in this table are the Mercedes models which historically have been much hotter property. In particular the S Class which, whilst widely acknowledged as one of the best cars in its sector, there are numerous examples of these in the used car market at present, and more than the market can readily absorb. Also of concern is the Lexus CT200h which many in the trade see as a quality product but with a low spec level and high proportionate cost. However, buyers must consider the fact that these models may be cost effective to buy in the trade and therefore may carry much greater margins.

Clearly, deciding on what to stock has become more complicated as a result of the near disappearance of seasonality and therefore our contacts indicate that stocking policy comes down to a balance of popularity and cost effectiveness. To be clear this means that a product young in its lifecycle, such as the Ford B-Max, or in one of the newer niche markets, such as the Kia Sportage or Hyundai ix35, make better sense. These models must then be taken into context by considering market availability and possible margin whilst also considering refurbishment costs. Only by assessing all factors can a properly informed commercial decision be made. It is also worth noting that regional variations must also be considered.

So the question remains, where is the retail market now, and what will be the best and most profitable sellers in what is likely to be a very different November to those experienced in previous years? The answer is to be sharp, quick-witted and to react to the market information available to ensure the best result.

MARKET TREND

New Car Registrations

With 403,136 vehicles registered for September the new car market exceeded Glass’s prediction for the month. The growth is made all the more striking by the fact that it is the first time since 2009 that registrations have exceeded March registration performances, which at the time was attributable to the scrappage scheme. Therefore it does begin to arouse suspicions that some manufacturers may be forcing registrations in order to not fall behind target in the race for market share in 2013.

Looking at the specific performances for the month, petrol outperformed diesel in terms of year-on-year growth (12.9% versus 10.6% respectively). Furthermore, petrol-variants constituted the majority of vehicle sales for the month (203,993 versus 192,816). Due to this exceptionally strong performance, year-to-date figures show petrol pulling away from diesel – in terms of market share – as it is up 0.2% to 49.6% for 2013, versus 49.0% for diesel.

In the same vein as March, the majority of September’s purchases were made by private buyers, with 208,844 units being registered by this group. This represented a 17.9% growth year-on-year. Fleet purchases grew by 170,569 units (a more modest 5.4% year-on-year) whilst business purchases grew to by 23,723 units or 15.3%, versus 2012.

As now customary, Ford retained pole position for the month with the Fiesta, whilst Vauxhall’s Corsa took second spot. The Ford Focus climbed to third place and Volkswagen’s Golf, whilst falling to fourth, fared better than the Astra which fell to fifth position. However, year-to-date the status quo is maintained; both Fiesta and Focus retain in 1st and 2nd positions and GM’s Corsa and Astra hold 3rd and 4th positions. The only other manufacturer holding multiple places in the top ten is BMW, which has 7th and 8th courtesy of the 3-series and 1-series respectively.

October’s registrations now fall under the watchful gaze of the industry and after a stellar September it is increasingly difficult not to expect anything other than higher volumes versus the same period in 2012. The strongest performance that October has produced since the inception of two plate-changes per year came in 2001 with over 185,000 vehicles as buyers, vendors and manufacturers scrambled to register vehicles with the brand-new registration format. Whilst this level of performance is highly unlikely to happen, it should be noted that October will mark the second month of the 63-plate and if, somewhat perversely, private-buyer interest in 2013 has been constrained due to the 13-plate (as suggested by some quarters) then we could see a boost to Octobers figures, which, based on Glass’s SAAR, should achieve the region of 157,000 vehicles.

This would result in a 7% market share for the month, which is reflective of the traditional performance of October and puts the UK on course to register 2.2 million vehicles in 2013. 

Wholesale activity

With Retail demand still strong, many dealers have been pleasantly surprised at the strength of the used car market and it seems likely that this level of activity will continue into the early part of November where a downturn is now possible. The only things that may have a negative impact on the current situation would be a severe downturn in the weather or deteriorating economic circumstances, neither of which seem to be likely at this point.

Sustained Retail demand is also good news for auction and trade activity as it ensures that there is a route to market for the increased supply of used cars that is normal for this time of year. Contract Hire and Leasing de-fleet activity is in full flow once again and Rental fleets are also defleeting following the summer season, so vehicle supply has increased by up to 30% in some instances. The disappointing side to this is the stock profile which remains poor offering relatively little choice for the trade buyers and as such the retail buyers too. However, the latter group seems to have adjusted to the fact that finding a high spec car is difficult and appear to be happy to either settle for what a dealer has to offer, or pay a premium for a top spec car.

Demand for convertibles will shortly be at an annual low and, although values have dropped, it will be interesting to see just how far they go. Conversely, it is surprising to see such a boost to Premium 4x4 values which have remained strong all year. Demand for small cars will continue at current levels whilst there will be a likely drop off in demand for MPVs and an increase in demand for Prestige models.

November Guide Values and Prospects

During the coming weeks it is possible we will see a change in the fortunes of the used car market as we head towards the festive season. Traditionally the market takes a downward turn in both trade and retail terms and values usually decline at a greater rate than at most other times of the year – in some cases by up to 3%. However, during the course of this year values have remained particularly stable and there is a good chance that the market will remain stronger than expected.

De-fleet activity is likely to remain higher and there may well be a greater choice of models for the trade and retail buyer alike. Conversion rates at the auctions are likely to slide one or two points but generally speaking November is unlikely to be cause for concern until, perhaps, the last week when both retail demand and supply may wane. Despite this, the balance of supply to demand is expected to remain constant. As such values for November will remain largely stable for most models.

Rupert Pontin

Chief Car Editor