The National Association of Motor Auctions has reported a significant, but unsurprising change in the used car market with a stark contrast in price movements between September and early October.
In September cars of all ages increased in price by just over 2%, with three-year old fleet cars faring slightly better at 3%.
However, interim figures issued by NAMA show that by the end of the second week in October, the 3% gain in the fleet sector had been completely reversed.
Average conversion rates reached a four-month high of 77% last month, but by the second week of October a combination of additional auction supply and a reduction in demand, eroded this figure to close to 70% and falling.
Given the high probability that trading conditions will not improve in the coming weeks, it is critically important for vendors to secure the best prices for their entered stock and as the NAMA figures show below, the first bid is very often the best bid.
Andrew Hulme, NAMA chairman said: “Professional wholesale and auction buyers have more choice than at any time since the late spring and demand has become increasingly polarised.
“Values remain healthy for Grade 1 and 2 cars largely due to the ongoing shortage of retail ready stock, but there is little appetite for Grade 4 and 5 stock unless it is realistically valued to sell.
“Buyers factor in the real cost of refurbishment and downtime financing and simply deduct that from their bidding, because they want cars to retail today, not to sit in refurb shops for up to 28 days.
“Vendors must focus on their least attractive vehicles and invest in appearance re-conditioning and refurbishment to generate buyer interest. This will address the current build-up of unsold, multiple entered stock that is starting to clog the arteries of the wholesale market.
“Sellers must recognise the absolute realities of the market – they are unlikely to achieve Cap Clean prices for Cap Average cars and, if further proof were needed, September’s data records a price differential of £900 between first time sales and subsequent sales.
“There is every reason to believe there will be an increase in poor quality stock coming into the market over the next eight weeks, yet little indication that retail activity and wholesale demand will improve during that period.
“It will ultimately be seen as an act of good management if these conditions are interpreted pragmatically and all remarketing teams need to ask themselves “why should we sell a vehicle for less next month when we can sell it today for more?” We can be sure that Finance Directors will be asking the very same questions.”