Buyers are continuing to pay close to top dollar for defleeted top quality company cars, but experts are warning of a tightening market with investment in pre-sale repairs paying dividends.

Auction houses report continuing price buoyancy, but dig beneath headline values and there are a myriad of concerns that leasing companies must respond to, according to experts.

Chief among them is, not withstanding the shortage of cars entering the used market, the lack of variety among models being defleeted and those going under the hammer frequently having a lower specification than vehicles of yesteryear.

Critical also is the discrepancy between leasing companies that want to capitalise on residual value windfalls and their customers that are continuing to look to extend replacement cycles in what, in some business sectors, remain tough trading conditions.

Finally, according to the Vehicle Remarketing Association (VRA), the wholesale market has this year seen changes in the mix, age and condition of used stock returning to market. Members, it says, report four to five-year-old stock becoming the norm, as opposed to the three to four-year-old stock which the industry became used to in years gone by.

Roger Woodward, managing director of remarketing company, CD Auction Group, summed up current market conditions when he said: “The underlying shortage of good ex-fleet cars coming to auction remains a factor and demand for the right vehicles is high.”

However, he added: “This is putting leasing companies in a difficult position. We understand that many of their clients, the end users, are looking to extend leases and may not want to be seen to invest in new vehicles during current economic times.”

But, he warned: “This is false economy; not just from the running cost point of view but also because of the long term, low interest rates now in place and strong manufacturer incentives on new. We think leasing companies, and their customers, should be taking full advantage of the deals on offer and trading out of older vehicles now.”

Auction giant BCA saw average hammer prices for ex-fleet and lease cars fall to £8,592 last month, compared to a 2013 high of £8,851 in February and a fall of £142 (1.6%) compared to March. But values remain ‘significantly higher’ than they were a year ago (see chart).  

Simon Henstock, BCA’s UK operations director, said: “Post-Easter, stock availability has improved with the inevitable result that there has been some pressure on values and conversion rates. That said, we are still seeing plenty of interest in well-presented retail quality vehicles and here values continue to outperform price guide expectations.”

Although the long term factor affecting the used car market remains - reduced stock availability - resulting in continuing strong values, despite professional buyer demand often appearing ‘fairly fragile’, Henstock warned: “When volumes rise, average values can change very quickly.”