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CAP trade watch: Confidence to hit prices

Consumer confidence will be the dominant issue this year, carrying over from 2005. In the used car market, for many people changing their car is a luxury that can be put on hold while more pressing commitments such as rising energy costs and general living expenses are met.

This puts further pressure on margins as prices reduce to meet market expectations.

The adage that the right car will find the right buyer will still apply - despite the likelihood of much pessimistic and doom-laden commentary. Consumer resistance to poor colours, condition, specification and high mileage will continue, pushing values down for less desirable cars, although this can hardly surprise anyone.

Corporate confidence tends to follow that of the consumer so there will be hardening conditions in the new car market too. This will likely be fuelled by continuing extensions in the replacement cycle of company cars, resulting in pressure on new car turnover. This will also increase the age and mileage of traditional ex-company car stock.

In many automotive sectors we will see the continuing emergence of ever bigger players, through merger and acquisition as businesses continue to pursue economies of scale.

However, this does not spell the end of the smaller dealer business, for example, as there remains a significant proportion of consumers who prefer the personal feel of dealing with a smaller operation.

Overall 2006 will be characterised by caution. There is money in the economy but that is no guarantee it will be spent. The winners next year will be those who succeed in unlocking the necessary confidence in their customers that they are safe to spend theirs.

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