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Under £5,000 market booming

As predicted last month, retail demand has remained steady and trade prices largely followed suit, although we are beginning to notice a slight slow down in trade buying activity.

One sector of the market that seems to remain constant is the area of retailing cars priced under £5,000. Most towns and cities are littered with small independent traders and retailers offering this type of stock.

The reason for this consistency is price, with buyers in this market always abundant. This is combined with a steady supply of mid-to-high mileage three-to-five year-old cars and the effects of last year's depreciation on used car values which brought some excellent vehicles into this price range.

Among the favourites are upper medium sector cars like Mondeo and Vectra and lower medium models like Astra, Peugeot 306 and Escort. All of these are available in large numbers to retail sub-£5,000 - in many cases high mileage examples are hitting the £3,995 mark.

At the opposite end of the scale, nearly new cars are also in reasonable demand. Although priced higher, most are substantially cheaper than the new option and offer a sensible retail proposition.

Older, less desirable cars between seven-to-10 years old can still cause a headache for dealers. The importance of correct appraisal is as relevant as ever, not only when the car is being looked at as a part exchange but also by the vendor when the car is sold through auction.

Although most large volume disposers are now looking at and conditioning vehicles when setting reserves, there is still a hardcore who insist on setting the Cap Clean value as a reserve on average and below average vehicles.

This can often lead to a loss of revenue because cars that are set with unrealistic reserves often wander from auction to auction week after week until a lower bid is eventually accepted.

It is also one of the reasons why we have seen auctions with an abundance of older, poor condition cars and why we can often see the same car going through auctions for more than a month before a bid is finally accepted.

Inevitably somewhere along the road a higher bid will have been turned down in an attempt to achieve an unrealistic reserve so not only are they taking less money, but funds are being tied up in the vehicle.

It doesn't take a genius to work out that, if a company has hundreds of cars like this floating around in the system, they are losing interest on hundreds of thousands of pounds and tying up a lot of working capital. Thankfully, however, most of the volume disposers have addressed this problem.

We expect the market to continue on its steady track for the next few weeks with retail demand likely to be reasonably firm, certainly until the results of the election are settled.

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