Professor Colin Tourick’s questioning of VRA members has exposed a fragile confidence in the remarketing industry.
When asked would a “significant number” of companies involved in the sector be unlikely to survive a downturn, more than one in four (26.9%) said yes.
Tourick admitted he was “surprised” by the level of the response. But in the same survey, 84.6% of respondents say they are experiencing pressure on the prices they are able to charge for their services, with one in three describing that pressure as “great”.
That pressure could continue to grow as well, with many predicting an uncertain future in the sector for at least the next 12 months.
Presenting his findings at the recent VRA conference, Tourick asked the audience when they believed they would see a return to normality in the used car market.
More than three in five attendees (65%) said it wouldn’t return before the end of 2011 and more than half of those suggested it could be at least 18 months – half way through 2012.
Meanwhile, 16% said they believed the market had already returned to normality.
“But what do we mean by normality?” asks Tourick. “Used car prices have this nice little trend that rises and falls, there’s no real sharp movement, volumes are highly predictable, manufacturers are quite active in the short cycle market, fleets are ordering their cars for three years, extension levels are static, as are early termination levels.”
However, while volumes in the used car market seem to have stabilised, he predicts it will decline further still, blaming the downturn in new vehicle supply three years ago - what that will mean for residual values, remains to be seen.