Manheim has said despite tumbling residuals, a serious over supply of used vehicles and fewer buyers at auctions, the used car market remains “relatively healthy”.
The auction giant’s group non-executive director, Rob Barr said this year – especially the second half – has presented "serious challenges" for both buyers and sellers.
Key to much of the problem was the restriction of wholesale funding and retail finance.
However, Mr Barr said that while sales of used cars have fallen they have only fallen at half the rate of new car sales.
As sales remain depressed, so the country’s auction houses and their lease customers are facing the real prospect of running out of space.
Used cars coming off lease and those coming up for sale as a result of early contract terminations mean supply is continuing to outstrip demand.
Looking across the Atlantic where Manheim is seeing stock levels 29% higher than this time last year, the company’s CEO, John Bailey, warned: “If we were to operate with that type of excess stock, we would be in gridlock.”
He said what happens in the US is normally mirrored here some months later, but this time lapse has almost disappeared.
To avoid a gridlock situation and the possibility of auctions having to turn away cars that lease companies are trying to sell, Mr Bailey said fleets must set realistic auction reserves and value their cars correctly.
This advice was echoed by Mike Pilkington, managing director of Manheim auctions and remarketing, although it was also tinged with a hint of optimism.
“2009 will be the year of the used car,” he said.
“Supply and demand will determine the price and we saw that conversion rates were up in November, which is encouraging.”
However, looking over the 2008 sales figures it is clear the used car market is in dire straits.
Sale prices have fallen consistently since hitting a high in February.
Although no monthly fall was greater than 5%, it still meant that £1,330 was wiped off average used car prices during what remained of 2008.
On a positive note, Manheim is not anticipating any increase in defleet volumes.
While many companies are returning cars early due to redundancies or cost cutting, others are being tempted to keep what cars they have on extended contracts.
This has meant the supply of used cars has somewhat levelled off.
But a lot of vehicles remain unsold at auction sites and to get stock moving again, Manheim has introduced its ‘superseller’ programme, which requires sellers – typically lease companies – to commit to sell 80% of their stock at an auction.