Retail demand for used cars is stronger than at any time since September last year, according to CAP Automotive.

Research for CAP Black Book Live reveals a number of increasingly positive market indicators since the start of 2013.

These range from the mood and buying activity at auctions to consumer retail demand on the forecourt.

But dealers are still reporting difficulty in sourcing good quality used car stock for retail following the reduction in new car registrations of recent years. And that problem may worsen as increasing numbers of poor condition cars with high mileage continue returning to the market.

Coupled with dealer caution over becoming over-stocked, this shortage of ‘prime’ retail stock is keeping forecourts only around 80% full.

Black Book Live – which tracks market prices in real time – has been reporting general stability in trade values.

Derren Martin, senior editor for CAP Black Book Live, said: "We are seeing what we describe as a good ‘buzz’ around the auction halls, with plenty of appetite from dealers for the best quality stock – when they can find it.

"Some auction sales have seen conversion rates up to 20% better than during the same period last year and the dealers we speak to are generally happy with the level of retail interest they are seeing.

"We keep a close watch on the market every day and there have been some signs that increased short term rental business for some model ranges is starting to bring higher volumes into the marketplace. When that happens, prices tend to reduce but at the moment stability is the watchword in the current trade market."