Fleet News

Industry split over when the upturn will happen

##CAPsml--left####Martin Ward--right##THERE is no clear picture of car retail market fortunes at the moment. It all depends on who you talk to and where in the country they are.

The one thing they all have in common is concern over reduced showroom traffic. Very few dealers are having a good time, but many are forgetting that they rarely do at this time of year. It is just a case of keeping going until the better times arrive, usually in January.

However, for some reason there is a clear division between those who think normality will return in mid-January and those who see no upturn in the near future. It is easy to forget that we have been here before, many times. There is a bad autumn, then - as if by magic - the public put on their car buying heads early in the new year and everything takes off again, as it always does.

But at the moment, the trade can see more used cars than ever for sale in the marketplace and they are only in the mood to take them at very low prices.

To understand this negative sentiment, you need to take a simplified view of the current problems.

In September around 443,000 new cars were registered. Assume that around 10 per cent were demonstrators, courtesy cars and (thinking the unthinkable) there could have been a few pre-registrations in there. That makes a total of around 45,000 vehicles that do not really have a home to go to.

Out of the 'true' sold vehicles, amounting to a massive figure of around 400,000, then you can assume that about 75 per cent brought in a part exchange, or a vehicle to replace it.

That adds up to 300,000 vehicles that have to be absorbed into the used car market, at a time when there is a general economic slowdown, the worst time of year for used cars, and signs of increasing reluctance among the public to spend money on any consumables of any sort.

But it does not stop there as many of the new cars sold in October and carrying on into November are creating even more used cars. The problem for all those who have cars to dispose of is compounds full to overflowing while many of the auction sites also become choc-a-bloc.

When first bid is best bid

SOME leasing companies which operate a system of selling cars direct to the trade are suffering, not from a load of unsold cars, but cars that are sold and paid for but left in already overcrowded compounds because the trade no longer has space on its own forecourts.

They have committed to buying certain cars, in the hope that things begin to pick up but so far this hasn't happened. Some other leasing companies who use auctions exclusively have taken the brave move to take the best bid, and sell the vehicle first time. As we always say, it is often the first bid that's the best bid.

If there are as many 'pre-reg' cars around as some suspect, this could have a knock-on effect on nearly new, and ex-rental, as the gap between them closes.

This means downward pressure on Y reg, and even new-style 51 plates. Dealers who have traditionally retailed this desirable stock are having to weigh up what a new or pre-registered car can be bought for, before committing themselves to bidding on a nearly new.

Parallel import tide goes on

On top of the 443,000 registrations, we should not forget the parallel imports from countries such as Belgium, Holland, Cyprus and Southern Ireland, plus other locations where they are trying to muscle in on this lucrative act.

One large supermarket which specialises in imports says it is selling around 400 per week - over 20,000 per year - a volume some manufacturers or importers would die for.

The full extent of imports remains officially unknown, but whatever it was last year, the predictions are that it will be higher this time. The price re-alignments of last year seem to have done nothing to stem the number of new cars being brought in from Europe. And all these imports are creating even more part exchanges, adding to an uneven balance between supply and demand in the used market.

  • FNN allows you to search for REAL prices reached by REAL vehicles sold at the country's leading car auctions. To start your search click here.

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee