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CAP trade watch: Steadier and less volatile market

During the run-up to Christmas there was increasing evidence that the market was behaving differently from the old pattern of dealers reducing stock levels, followed by the consequent glut in trade cars leading to falling trade values.

This followed a similar pattern observed last year, when the old familiar January rise in used values was not as marked as it had been historically. The end of 2006 and the beginning of 2007, in other words, could be described as steadier and less volatile than could have expected a few years ago.

Research during the closing months of 2006 consistently revealed a view around the marketplace that there was a general shortage of stock available.

This is difficult to quantify in hard numbers but the claim is certainly supported by the many vendors who were consistently reporting lower return volumes than they had anticipated.

It will be interesting to see whether or not the market continues to maintain this more stable pattern going forward and whether this will become the norm.

To illustrate the changes we have tracked so far, in 2004 the overall Black Book movement from November into December for three-year-old 60,000 mile cars was –2.22%. In 2006 this movement was –0.86% for the same period.

The large upward movement anticipated by many from December into January failed to materialize, with an overall upward movement of only 0.36% compared with an upward movement of 0.71% for the December 2004 to January 2005 period.

Research suggests that this is partly being driven by a change in the old dealer practice of liquidating stock by the end of the year, for accounting purposes – only to have to buy more in January. This time there has certainly been more buying activity before the New Year in anticipation of the return of retail demand in January.

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