Although the job continues to be difficult as far as retail sales are concerned, one fact must be highlighted - that used cars have never been so cheap.
Continuing adverse publicity surrounding the car market has made a major contribution to the downturn in residuals and, although the pricing guides, like Cap Black Book, are often blamed for pulling the market down, in this case it is definitely the trade which is driving prices.
Cap recently conducted an exercise in which we pulled out the values from a 1995 edition of Black Book and compared six-month-old Cavalier and Mondeo prices with current equivalent Mondeo and Vectra. Even though the 1995 cars were just about to be superceded by new models, they still booked at about £1,000 more than today's equivalents. Also, the list prices on some of these cars has risen by up to £3,000 in the intervening period.
What this shows is that the gap between list and initial market trade value has widened considerably - more evidence that there is no direct link between the two. The reason for such trade pressure on values is the need to price retail cars as cheaply as possible and we are now reaching the stage where some people are retailing six-month-old Vectras at £8,995 and less which is, in many cases, not much more than 50% of original cost new. But this is the salesman's only chance to deal because the customer is not interested in any factor other than price.
As we have said before, if manufacturers were to reduce list prices on such cars by 10-15% then the trade value in most cases is already far enough away not to be affected at all. In fact, many people believe that, if prices were reduced, retail interest would come back sufficiently to stabilise and maybe even push some values back up a little. Looking to the three-to-five year-old sector - typically lease and contract hire vehicles - these look incredible value now as retail propositions with P-plate Vectra and Mondeo regularly seen retailing at £4,995 and below. What is evident at the older end of the market - up to 10 years - is that the cars performing best are the cheap-to-run small hatchbacks.
There are also some incredibly cheap 'lumps' in this sector. I recently saw a 1990 G-plate Supra 3.0 Turbo, a clean car in silver metallic, with 90,000 miles, bought in the trade for £1,200 to retail at £2,995. This is a perfect example of absolute luxury for next to nothing, yet offering a very good profit opportunity. I also saw, from the same source, a 93 K Cavalier 2.0 SRi in a bright metallic colour bought for £1,450 - again retailing at £2,995.
This heavy tackle needs to be cheap to offset the insurance and fuel consumption - but don't they look an eyeful. There are excellent opportunities all through the age ranges, with cars so cheap. This is the reaility that should be stressed to potential retail customers: they now have an opportunity to own something they previously couldn't afford.