Fleet News

Strong new car sales causes falter in conversion rates says VRA

Fleet news logo

The used market hasn’t really bounced back since the usual Easter value price reductions and while prices are holding up currently, fleet vendors have seen conversion rates fall to around 60-65% reports the VRA whose members sell, inspect, transport or manage more than two million used vehicles per annum.

This fall in demand is primarily down to franchised dealers having a strong March and April fuelling more part exchanges which is helping keep used stock levels high. This has reduced the need to source stock from the wider market.

Attractive Personal Contract Purchase deals available from manufacturers via captive finance companies have helped to create some of this stock availability. This growth in PCP is certainly helping make new cars more affordable for a wider audience than has been the case traditionally.  Quite a few of these cars are underwritten on two year contracts and when they appear in the used market, the demand and prices for this stock will likely be good as they fill a much needed price gap in the market between the nearly new stock and the 3-4 year old fleet stock.

Dealers are keeping hold of this “prime” stock as generally it is more varied than the stock mix coming from the fleet sector, which tends to be low emission diesels in a broadly similar specification, age, mileage and often, colour.

As the used market’s priorities are not significantly focussed on emissions, the lower emission cars can be a challenge for the used market unless they are in excellent condition, low mileage or they have the right combination of a high specification and in a good colour.

The issue of a heavily polarised mix from the fleet industry is likely to continue as drivers and employers strive to run the most CO2 and fuel efficient cars available. For asset owners it not only makes the right specification and colour of car even more critical at disposal time, but the case in which fleet mix demographics are playing a much more important role than ever going forward.

The VRA members believe that values are perhaps too high to be universally sustainable and it does appear that footfall is less certain and sentiment is generally poorer, so anticipate a slight softening, much more in line with “normal” seasonality of 4-6%, and perhaps even one or two per cent more, spread over the next 6 months (versus nearly no seasonality last year, in particular).

The average age/mileage combination of 42 months/64,000 miles (up from 39 months and 57,000 miles three years ago) means a slightly higher proportion of ex-fleet cars are coming back in a marginally less ready to retail condition. This shift, where fewer cars are ready to retail creates the current challenge for vendors to decide to refurbish when required and how much to limit spend versus likely achievable value uplift versus repair to maximise the result per car.

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee