Fleet News

Small cars remain king, says the VRA

With a prevailing tough economic climate and patchy recent months for the remarketing industry, small cars remain king with more and more buyers chasing a restricted stock, according to the Vehicle Remarketing Association (VRA).

In its market update for July and August, it says overall prices have pretty much returned to follow the seasonal norm, but whilst CAP recently downgraded trade prices across the board by 1.4%, some small cars actually bucked the trend with a small rise, while most executive cars continue to feel the pressure, some being marked down by as much as 8%.

Generally VRA members report July’s used car market as being fairly stable, reporting that there is plenty of evidence to suggest that dealers are continuing to increase their focus on used car retailing while the new car market is slow. This is likely to continue for some time with private new car sales remaining very weak – down by over 17% year to date. The big issue facing these expectant dealers is the shortage of vehicles meeting the right retail stock profile.

On this point, demand is being certainly being matched in terms of volume, but not necessarily by the quality of stock in the market. The VRA says there continues to be a disproportionate number of high mileage, poor condition cars around, which whilst still selling, are certainly ‘off the pace’ in terms of prices being achieved.

With September likely to be a quiet retail new car month, so the number of part exchanges reaching the market will be further restricted.

Certain manufacturers have now got some volumes of late year, low mileage cars returning to market and, as quantities are relatively low, they should be met with healthy demand, the VRA suggests.

Even if this supply remains constant to the end of the year these cars are likely to quickly find new homes, with the used models of those new cars suffering from long lead times, being particularly attractive.

These long lead times for certain manufacturers are still causing big issues for fleets in particular, but it looks as though many of the outstanding orders that have been in the supply pipeline for some months will be met by quarter four.

The VRA says this should free up a reasonable supply of ex-fleet cars into the used market, albeit the majority of this stock will be 4-5 years old with higher mileages and may not necessarily be what used car buyers are really looking for.

The market towards the end of the year is expected to be fairly stable, however large fleet vendors will need to decide whether to sell these returning company cars prior to Christmas, or perhaps wait for a price uplift in January, the likelihood of the latter being very difficult to predict.

Based on fleet extensions since the recession started in 2009, leasing companies are saying that four year/80,000 mile replacement cycles will now become the norm rather than the exception.

As reported in the last few VRA market reports, the used van market continues to go from strength to strength with prices remaining strong and stock availability limited. This looks set to continue through to Q1 2012, with a potential for the stock shortage to get worse in and around the London area. With the advent of the new Low Emission Zone in London, many older vehicles will have to be taken out of circulation, as they don’t conform to the new strict emissions regulations.

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