Fleet News

Report confirms impact of car price legislation on used market

BCA Europe and Sewells International, a sister publication to FNN, have warned that the disposals industry faces significant change amid the long-term fall in residual values. Used car buyers staying away from the forecourts and the new threats from internet-based car buying companies will herald a revolution in the used market.

A new report commissioned by BCA and carried out by Sewells concludes: 'Motorists don't know whether to buy a used car, or wait for a better deal when new car prices are cheaper. If that is not unsettling enough, the increasing impact of the internet and the surge of dot.com companies gate-crashing the market are threatening to change the face of used car business for ever.'

The report adds to a long run of bad news for fleets as they have seen hundreds of pounds wiped from the values of each of their fleet vehicles over the past few years. According to information supplied for the report by CAP Motor Research, used car values fell 7.3% year on year in June.

In the second quarter of this year, values fell by 6%, 2% worse than the first quarter. The biggest fall in values occurred at the top end of the market, in the MPV, upper-medium and executive sectors.

Mark Cowling, CAP's chief european economist, said: 'It should be enough to stabilise prices around the level they are now. It will be a further 18 to 24 months before used car prices start to rise again.'

The cause of the uncertainty is laid squarely on the shoulders of the Competition Commission's New Cars Inquiry and the Supply of New Cars Order 2000, which have shaken confidence in the industry and scared buyers away from committing to a used car purchase.

'Ceaseless media attention on the pricing issue, coupled with the motor industry's lack of success in presenting a convincing case to motorists, caused uncertainty in the minds of many used car buyers,' the report said. 'Many buyers decided to postpone buying, dashing hopes for renewed growth in the used car market following four years of comparative stability.'

The value of the used car market declined in 1999 by nearly £900 million to £28.3 billion, relecting the fall in both used car volumes and values. The total value of the UK car market remained at £57 billion for the second year, according to the report.

The new car market rose by £1 billion, compared with an increase of £3 billion in 1998, to £29.4 billion. But the report said: 'There are growing signs that the intense pressure by the media, dealers and the Government to reduce new car prices will be reflected in the UK new car market value for 2000.'

The report included a survey of 2,500 UK motorists and showed that more than one third now have access to the internet. Three-quarters of car owners accept the value of their vehicles will be pushed down by the effects of the Supply of New Cars Order 2000

  • The Used Car Market - a report by BCA Europe and Sewells International, is available for £99.95 by calling 01733 467191.

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