Fleet News

Used car trade beats those January blues

'THERE are two schools of thought on disposals around the end of the year. When the trade begins stocking up for the new year towards the end of the outgoing year, prices are often driven up thanks to the increase in trade demand fuelled by expectations of a January retail upturn.

Researching dealer experiences of the retail market during the early days of 2004 has revealed a shortage of good quality cars to buy for stock. This is because the majority of cars were acquired by the big groups, particularly during late November and December.

There are some potentially valuable factors to be teased out of these kinds of conditions. For example, of course it is true that values rise into the new year but this should be seen in the context of vastly reduced levels of trade and retail demand in the preceding two or three months.

Therefore, what should the disposal manager do to best take advantage of overall market movements? The ideal scenario is a chance to put good cars into the market when there is least competition but rising demand.

As it happens, there is indeed such a time – the early part of the year, when the bulk of winter disposals take place. This is confirmed by at least three measures – actual supply, actual demand and actual activity. Our research reveals that supply remains lower than the rest of the year between December and March.

Of course, retail activity is low in December but in the first part of the year demand begins to grow. Activity is also strong during this period, measured by a large increase in our own activities in terms of valuation support calls from dealers and the finance sector.

Therefore, a good car offered in March faces more competition because supply is high. A car offered in October and November also faces strong competition but is penalised by the drop in demand. A car sold in January/February does not face the same level of competition – as measured by general disposals activity – and also enters a market of rising demand.

Those disposal managers who have held some stock back for the early part of this year – and who are diligent about offering cars fully-prepped to high standards – now stand to benefit from significantly improved market conditions.

While this is based on fresh analysis of historical market conditions, research today has revealed increasing conversion rates, especially at manufacturer sales. With the retail used market looking healthy, things look good in terms of continued demand, which bodes well for disposals.

Additionally, there are not expected to be many part-exchanges coming into the market because many new car customers are now waiting until the March plate.

Dealers believe the retail buyer is now getting to grips with the new plate system and view the wait until March as worthwhile. With new car prices set to rise, some pressure will also be removed from the nearly-new market but it is too soon to suggest that values here will move up.'

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