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Used car values stay high

Car retailers are exploiting stable market conditions and demand for older vehicles to shift used car stock more efficiently and at higher values, despite patchy consumer demand.

Manheim Intelligence’s latest quarterly report into used car market dynamics reveals that while petrol and diesel vehicles are both achieving around 98% of CAP Clean at auction, the trade’s demand for diesels is beginning to decline, most prominently in the medium family car segment.

The report analysed the sales of more than 85,000 pre-owned cars through Manheim Auctions during the first quarter of the year. It found that dealers’ average stock turn has reduced from five days to four.

The average age of used vehicles sold through Manheim’s auctions has increased by one month to 39 months (three years and three months) compared with the last quarter of 2004, while average mileage has also risen from 48,792 to 49,723.

However this remains below the Q2 2004 peak of 51,425 miles and 39 months, and the vehicles are still achieving a credible 40.1% of their new registration value.

“The market so far this year has been indifferent, taking a while to warm up in the first couple of months and without the often anticipated surge in activity early on,” says John Bailey, Manheim Europe chief executive.

“A number of our retail dealer customers have reported consumer demand being patchy, but the wholesale market has been reasonably stable throughout and activity levels have picked up towards the end of this quarter.”

Manheim’s analysts believe a trend in used car volumes is beginning to emerge. In 2003 and 2004, a sharp fall in sales during the final quarter has was followed by steady growth through the first half of the following year leading to a peak in Q3, meaning most dealerships should see increased business over the summer.

Bailey is upbeat about the future of the sector. “General economic factors, including stable interest rates and a fairly tame Budget, should ensure continued demand. In general terms, actual values of vehicles sold have increased by 2-3% in this quarter over the last quarter of 2004,” he says. “Recent speculation about rising interest rates post the May election may quell retail demand in the next month or so but this remains to be seen.”

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