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Fleet prices and conversions rise as shortage bites

Activity in the used car wholesale market has been typified by a shortage of stock during the third quarter of 2005, figures from BCA reveal.

BCA Pulse – the quarterly electronic publication providing the latest wholesale market pricing data from BCA – shows that prices of three-year-old cars have risen as a result.

The major beneficiaries of this have been in the fleet and leasing sectors, where increases in price achieved and versus guide price reflect continued high demand in a relatively thin market. Average prices hit their highest point for 18 months, while BCA reports that conversion rates have been consistently high during the third quarter.

BCA Pulse shows that average prices for the three-year-old, 60,000 mile car rose by £134 or 2.1% over the second quarter of the year, to sit at £6,308. Year on year, values are £339 ahead of Q3 2004, equivalent to a rise of 5.6%. Average mileage has risen marginally, while the product profile continues to get slightly younger, currently sitting at 37 months, compared to over 38 months a year ago.

The nearly-new sector also continued to do well, and despite a small average fall in value is still significantly ahead in value terms of where the market sat last year. CAP Clean performance on nearly new product at BCA also improved significantly, to 102.7% - the highest position for 12 months.

BCA reports the average value of a nearly-new car at £11,291 in Q3, 2005. While this is down by £275 against Q2, 2005, the year-on-year figure shows an increase of £1,354 (13.6%) over 2004. In addition average mileage rose by over 600 miles – significant on nearly-new product.

BCA suggests with retail new car sales slowing, it appears that many motorists who may have bought new are now seeking out relatively good value nearly-new cars. This is consistent with the current economic climate, which has seen big-ticket item sales struggle in virtually every sector.

BCA found no great movements in the part-exchange sector, where the slow retail market has meant the dealer groups have taken in fewer vehicles in exchange and – consequently – have brought fewer to the open market for much of 2005. Both age and mileage were marginally higher than the previous quarter and these factors alone would account for the small drop in average value of £59. Year-on-year, Q3 is £42 ahead of 2004.

BCA suggests the wholesale diesel market is exceptionally buoyant and the signs are that demand is going to be maintained at these high levels. Splitting BCA’s Q3 figures into petrol and diesel segments highlights the interest from the professional buyer, who is prepared to pay more for diesel product despite the higher average mileages at the time of sale.

Looking at the fleet sector, the average mileage for diesel product at remarketing is over 67,000, compared to just under 50,000 for petrol. However, price performance on diesel is on average over 10% higher at £6,649, compared to £6,042 for petrol.

The price differential on nearly new is a substantial £3,000 plus at a very similar age and mileage. On part-exchange vehicles there is a premium of over £1,800 paid for diesel, (equivalent to a 71% increase). This is despite an average mileage of 77,000 for diesel and 64,000 for petrol.

The BCA Price Index tracks the average prices, weighted to volume, across these three key sectors of the marketplace to give an instant snapshot of where the market is going. Taking Q1 04 as Base 100, it currently sits at 102.07, an improvement of 1.3 points over Q2 05 and nearly three points ahead, year on year. BCA suggests this price recovery has its roots in the relative shortage of stock, allied to acceptable levels of demand, which is keeping churn high – conversion rates of 80% and 90% have been commonplace during the last three months.

Tony Gannon, BCA’s commercial strategy and communications director, said: ‘Our figures show that the overall price performance during Q3 has improved, thanks to the strong buyer demand at BCA for the typical three-year old ex-fleet or lease car. Prices in this sector are at their highest point for some 18 months and are some £350 ahead, year-on-year.’

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