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Lack of retail interest leaves used values in the doldrums

The past few weeks have failed to bring the much-needed upturn in retail interest which is necessary to steady the fall in used car values. Car prices have by no means crashed, but they have fallen for well over a year, leaving most people surprised and disheartened.

Although Cap was predicting it from the end of 1997 the continuing downturn in values has unsettled the whole market and even the optimists are beginning to accept that this year is not going to see a return to the buoyancy of recent years.

So, what is causing the continuing problems?

It is a combination of factors, not least the introduction of the twice-yearly plate change. Apart from the inevitable changes in disposal patterns - and therefore the balance of supply and demand - we should not underestimate the effect of simple confusion it has created among the trade and retail customers.

The other major unsettling factor at the moment is the widespread belief that a price realignment with Europe is under way.

Despite the fact that, overall, new car prices in the UK are still rising, much publicised price cuts on certain models have led to the assumption that these have been prompted by the Office of Fair Trading's inquiry into the nature of Britain's franchised dealer system.

However there remains a strong vein of optimism among many dealers that a return of retail confidence will occur in the latter part of the year. August and September are the favoured months for the arrival of retail punters in significant numbers onto the forecourts.

This is partly based on the belief that old habits die hard and that many of them will continue to follow the traditional buying patterns - at least for this year, while the new system hasn't quite sunk into their minds.

The trade believes that, if anything, the confusion caused by the new plates may have actually reinforced many people's tendency to stick with what is comfortable - and that means changing their car in August.

We should not forget that many finance arrangements will come to an end in August too, which will also motivate many buyers to start shopping again.

But for now, things remain a bit sticky and few I know in the industry have outperformed their own predictions for the year so far. And those who have managed to exceed targets have been carefully reassessing their disposal methods.

Dealers who are hitting original volume targets have tended to do so only at the expense of margins.

Although nobody ever wants to work for less money it is those people who are able to move quickly enough to follow the twists and turns of the market. They are also in a position to capitalise should the hoped-for retail upturn materialise.

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