AM Online

New year signals renewed retail interest

Although the past 12 months have been quite disastrous for many used car people, a more positive mood emerged ahead of January. Used car buyers returned during December and although they were inevitably cherry-picking, they were leaving with cars.

One change of tack was detected during December. Many larger groups chose not to bail out, as they have traditionally, but hold on to cars in the expectation of stronger values in January.

Having spent several years watching the guides come back in the new year, they assumed it would happen again. However, January bucked that trend, illustrating how dangerous it is to base your assumptions on past performance.

The December pick-up begged the question of whether it would be justified by renewed retail interest in the new year.

There are signs that this has been happening. One group boss said his dealers had experienced a “very average” start to the year on new, but over Christmas, there had been a bit of a surge on used.

The trade has been hitting 98R values in anticipation of the S-plates and there is still much uncertainty about late-lettered cars due from rental companies. The latest-plate premium is created by the trade and refined according to retail demand.

Releasing late-lettered cars into the market is a finely-balanced art and one tack taken by a few of the rental and leasing operators has been to extend their operating cycles. However, when the S-plates do start to come, they will still be appearing in big numbers. These cars will have to be sensible money, which will maintain serious pressure on the R-plate.

Again, this depends on the level of retail demand. It will not matter what the disposal manager wants – the manufacturers can influence what their own dealers will pay for some stock, but in general, the dealers will decide what the S-plate is worth.

Another factor is the introduction of heavily discounted special editions which have almost identical spec to standard models. This is designed to stimulate retail demand but it leads to increased downward pressure on late-plate values.

There are some who also view it as a reaction to the pressure for price alignment with Europe. There are two interpretations as to the manufacturers' intentions. It is either a move towards alignment or an attempt to show that harmonisation is not necessary because cheap cars are already available. The price harmonisation issue will always be hovering in the shadows during 1999, adding to continued uncertainty.

The market is likely to see a shortage of three-to-five-year-old stock at the end of this month. If – or when – that point is reached, it will inevitably firm up values.

Given the imminent arrival of S-plates and the impact that will have on late-plate values, we might see a polarised market in the immediate future.

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