AM Online

Trade continues to 'cherry pick'

Market conditions during June have generated a mixed response from dealers. Some are witnessing unexpected buoyancy in the retail sector while others believe the market has finally dropped off and are preparing for a tough few months.

The truth of the matter is that there are plenty of retail buyers out there and the difference between the two is down to a properly motivated sales team and an active marketing campaign.

Over the past few weeks, we have seen an upturn in auction activity with some trade buyers appearing to have an open cheque book.

However, conversion rates appear to be lower than in previous months, attracting figures of around 70-80%. That said, it is still Cap Clean cars with a good trim level and sensible mileage that are attracting most of the interest and making strong money.

This confirms that the trade is still – probably more than ever – cherry picking.

Even more than in previous months, average cars with high mileage are being cast aside, widening the margin between a clean car and an average one.

This is increasing the pressure on leasing companies and other vendors to have their cars professionally prepared for sale – note the expanding cosmetic repair and valeting business – in an attempt to generate what could otherwise be lost revenue.

A new level of mileage considered acceptable has caused some vendors headaches. Cars with 80,000 miles or more are fast becoming a major problem with some companies refusing to provide finance.

Those with 100,000 miles and above can be nigh on impossible to retail, unless they are diesel, creating a huge impact on trade values. That's not to say they won't sell, but it can heavily reduce the price.

The nearly new sector of the market is still buoyant as the gap between new and nearly new prices remains significant. Ex-rental stock is abundant especially with mainstream manufacturers, however the trim levels available are limited mainly to LS, SRi and LX.

In this sector, it is quite often the retail mark-up that is under the most pressure as a price war is generated between dealer groups.

Diesel models are in strong demand at present, especially the new generation low emission diesels such as VW's 115 PD, Ford's new 2-litre and the desirable Peugeot Hdi. The premium for a diesel over a petrol model is currently increasing with a Peugeot 406 diesel now commanding up to £1,600 more than the petrol equivalent.

This also applies to the MPV market where reduced running costs are more of a necessity, especially for private buyers.

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