The cooling of the used car market continued in October as traditional seasonal influences return to the market, with dealers exercising caution on the stock they were buying.

All the key players agree that used car prices are going to harden for the remainder of the year, although by how much is subject to debate.

Manheim’s analysis of the auction halls last month reveals a fall in value of 3.5%, with the average car selling for £7,173.

Over at BCA the average car achieved £6,021 – a 3.2% drop on September’s results. 

However, both figures are well ahead of the same period last year (31.3% for Manheim and 27% for BCA) when used values began their descent into the abyss.

BCA sales director Mark Hankey said: “There has been a change in market dynamics over the past six or seven weeks.

"Volumes have increased and the net effect is that we have moved from an above CAP Clean market to below it in a few short weeks.

“When taken in the context of the exceptionally strong prices we have recorded this year, it is not surprising that the combination of rising volumes and the typical seasonal slowdown in advance of Christmas have cooled prices somewhat.”

Manheim Auctions and Remarketing managing director Mike Pilkington added: “These price movements are in line with seasonal norms and reflect the more cautious and selective approach to purchasing stock at this time of year.

“Although demand remains healthy, some vehicles are now struggling to find new homes.

"Vendors need to be more realistic about price expectations and consider once again investing in more vehicle preparation to present vehicles to buyers in the best possible manner.”

In the fleet sector, average values fell by 2.1% at Manheim to £6,413, while BCA saw a 3% drop to £7,616.

CAP Black Book says it has seen caution return to the used car market. It added: “Buyers are extremely nervous and cautious over the prices they are prepared to pay for stock.

“Principally, the fear is around the risk of failing to move cars profitably and quickly in a naturally slowing winter marketplace.”

Theo Kortland, business development director at GRS, said that prices were stabilising and returning to ‘normal levels’.

He added: “We’ve seen a slowing in demand during October and believe this to be a result of slowing retail demand and the desire of many retailers to end the year with appropriate stock levels in line with their financial covenants.”

Aston Barclay group sales director David Scarborough agreed.

He said: “Conversion rates have fallen away considerably over the last few weeks as vendors adjust to a rapidly changing market place.”

October felt like “the first normal month of the year”, according to Autoquake.com founder and chief marketing officer Fredrik Skantze, thanks to a regular book drop and seasonal reduction in demand.

He said: “We have seen online retail values returning to what we consider to be stable market conditions.

“A car which would have retailed for £10,000 at the beginning of September was typically listed at £9,300-£9,400 by the end of last month – a 6-7% drop in two months.

“But while there was a substantial price drop in the beginning of October, the price reduction slowed down and started to stabilise towards the back end of the month.”

Looking ahead to 2010

Next year’s used car market will not be anywhere near as volatile as it has been over the past 12 months.

Certainly, the remarketing players will be hoping for a more stable time, although predicting what the market will be like is tough.

Supply of ex-fleet vehicles will remain constrained over the next three years due to the lack of new car sales to fleets this year, which will keep prices robust.

BCA chief executive Jon Olsen doesn’t see fleet sales picking up while uncertainty over unemployment levels remains.

“Fleets will return when employment comes back – probably not until the end of next year,” he says.

Theo Kortland at GRS added: “Supply is restricted and that is a situation that will continue well into 2010. Manufacturers have been reducing vehicle production for a prolonged period, with supply into the short-cycle market being seriously restricted.

“Also contract hire and leasing companies haven’t been growing their fleets as a result of the economic downturn and the result is a situation where supply will continue to experience serious pressures and we anticipate prices to strengthen going into 2010.”

Aston Barclay’s David Scarborough added: “No-one can accurately predict how the used car market will go. There are too many political changes ahead that will affect our industry, including fuel costs, the VAT increase, redundancies and tax increases.

“In addition, the higher starting prices of cars and the guide books now compared to the same period of 2008 means we are unlikely to see the euphoria that we experienced early this year.”