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Seasonal swings in the value of used cars

When they are setting residual values many forecasters do a great deal of research on the car itself.

They ask the right questions, such as what market will this car fit into as a used vehicle, how desirable will it seem to the people in that market, how suitable will the spec, trim, colour, fuel and insurance groups be for those people?

The forecasters also often try to second guess the economic environment into which the car will emerge.

However, while all of that is necessary it isn't entirely sufficient. There is a further factor which people all too often fail to identify and which can have a small but significant impact on the car's disposal value. It is also a largely predictable factor because it is entirely cyclical.

It is the time of year in which the car will be sold on. There is a significant difference in the market value of a three-year-old car sold in, say, late October compared with during the first light of spring.

Take, for instance, a typical three-year-old Mondeo. If it had returned to the market last October one would have expected prices around the £4,250 mark. This compares with the same car in today's marketplace which would make closer to £4,500. A rise of £250 may not seem much, but spread across a large fleet it soon adds up to a considerable sum. This clearly demonstrates that the time of disposal is crucial and further suggests that adaptability in fleet policies could enable people to take full advantage of seasonal factors. By all means register a car new in October but maybe suggest that the terms of contract dictate that the car comes back into the used market in, say, February, March or April. Not only should the vehicle sell for a higher price, it should also sell more quickly. But what precisely is the nature of seasonal factors? Clearly when the potential used car buyer has their mind on other things then car sales are sluggish. There are several main periods when the typical used car buyer will be staying out of the marketplace. The longest is winter, when the short days and lousy weather are hardly conducive to running around shopping for a car. During winter we also have Christmas when there is simply too much call on the wallet to generally contemplate shelling out thousands on a car. We also know that whenever a Budget is due, used car sales tend to fall. The height of summer also is quiet, with people either paying for a holiday, enjoying the same or generally spending more time doing nothing. These periods are reasonably predictable and the art is to ensure that you are not selling cars during the deathly quiet ones.

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