Fleet News

Used car market continues to suffer

The used car market is continuing to perform poorly, heightening fears that oversupply problems will push prices further on a downward spiral.

“Trading conditions in May have, if anything, worsened, with demand continuing to decline and conversion rates still under pressure,” said BCA communications director Tony Gannon.

“Anecdotal feedback from our dealer customers suggests that retail buyers are just not around in any great numbers, with many struggling to raise finance for any potential purchase.”

The news will come as a major blow to fleets who outright purchase their vehicles and rely on predicted residual values when they are defleeted.

However, even companies that lease their company cars may begin to feel the effect of the poor used car market as their lease providers look for ways to recoup losses at auction.

“Confidence in the used vehicle market remains fragile in the post-Easter period and supply has undoubtedly increased at a time when demand has fallen,” said Mr Gannon.

“While auction values were static in April on stock of comparable age and mileage, CAP values were consistently higher.

"This suggests either the quality and mix of stock has improved and values achieved did not reflect this upward shift or CAP values - which were set in March – proved to be overly optimistic.”

Colin Whelan, CAP business research manager, said: “The market has seen a marked deterioration since April and, because Black Book values are largely based on the hard evidence of actual transactional data, this is now being reflected.

"We also emphasise that CAP has a responsibility to reflect what is actually happening, rather than lead the market.

"This inevitably means occasions when published Black Book prices are briefly overtaken by events, particularly in the case of a swift deterioration in market conditions.”

Prices of well-presented, well-specified retail-quality cars were maintained in April.

However, little else was selling, said Mr Gannon.

“Conversions fell noticeably in April and there is now a lot of unsold stock remaining in the market, which is continuing to depreciate,” he said.

“This will inevitably be sold at what the market will realistically pay and that’s when we will see the average selling price reflect the true market condition.”

According to BCA’s Pulse data for April, average used car values were £5,406 - virtually unchanged from March.

However, it also shows that fleet and lease used car values had some modest growth from £6,619 in March to £6,642 in April, with similar age and mileage profiles.

CAP valued the same stock at £7,031, a rise of £160 over last month, resulting in a fall in the percentage achieved against CAP Clean from 96.3% to 94.4%.

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