Fleet News

Weakening used vehicle market prompts price fall

CAP has revised used values downwards by an average of 4% after seeing the market ‘slow significantly’ and a ‘large and increasing’ number of vehicles failing to sell.

Hardest hit are vehicles which fall into the five-year, 80,000-mile bracket, which Black Book has revised downwards by an average of 4.9%, while three-year-old models with 60,000 miles on the clock fall by an average of 3.9%.

“After a long period of stability, the previous six weeks have seen the market first ‘feathering away’ before slowing very significantly,” CAP reports in June’s Black Book editorial.

“It is now important to understand the subtleties of the market dynamic, which means recognising that not all cars are the same.

“For example, despite the more challenging conditions desirable cars have continued to command strong prices and indeed sometimes in excess of CAP Clean.

“But at the same time, a large and increasing number of vehicles, which are not in clean condition, are failing to sell at all. This is not because there is no market for anything but the best cars, rather because many vendors have been refusing to accept what are in truth fair bids that reflect the investment required in refurbishment.”

EurotaxGlass’s reports a similar downward trend in the market and has revised its prices downwards by between 2-2.5%.

“It’s a difficult call,” explains Adrian Rushmore, managing editor at EurotaxGlass’s. “It may well be that they fall by more and we have undercalled it.”

The news comes in the wake of Manheim reporting a 2.3% fall in used car prices in April, while BCA announced performance against CAP Clean had fallen by nearly two-and-a-half points.

“CAP is reading the market signals correctly, but is late in making the adjustment,” says Tony Gannon, BCA’s communications director. “An initial look at our Pulse figures for May suggests there was 3.6% fall last month, whereas CAP is making a similar adjustment across the board in June.

“There has been a subtle slowing of demand in the used car market over a number of weeks and we reported on this factor last month.

“This month we are seeing the first real concrete effects of that across the market – average prices have fallen, and we’re lower in May 2010 than they were in the corresponding month in 2009. That is the first time we have seen year-on-year values in decline since February 2009.”

The price adjustment will impact on what the leasing industry and outright purchase fleets expect to recoup through the sale of de-fleeted stock.

“The fleet sector has felt most of the pain in May,” adds Gannon. “Values fell by £443 to £7,428, equivalent to a drop of 5.6% over the month.

“Meanwhile, performance against CAP Clean fell for the second month running, from 96.9% to 94.86%, which gives further credence to the view there is a slowing of demand.

“In addition, we are now seeing some of the extended-contract vehicles coming back and the average age at remarketing has crept up by around a month – this will also affect values.”

CAP says an industry source estimates that cars which can justifiably be described as CAP Clean represent only around 15% of those being currently offered.

This has resulted in a build-up of volume and cars making repeat appearances and consequently receiving ever lower bids, according to CAP.

“In short, a shortage of nearly new stock diverts demand down the value chain and helps to prop prices up,” explains CAP. “Conversely, an increase in late plate supply weakens values and this ripples down through the age bands.”

CAP says this represents additional downward pressure on values at a time when economic and consumer confidence is fragile at best.

“There is no suggestion that this market is like that of 2008, but nor are there any significant indicators that conditions will improve in the short term,” concludes CAP.

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