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CAP Trade Watch: Dealers minimise risk over values

A used car trade values guide such as Black Book has to tread a careful line in order to do the job required of it by customers. 

For example, being published once a month and serving a live market means it is out of date very quickly if that market is moving fast.

This was highlighted earlier in the year when CAP was publicly branded as ‘over-optimistic’ for its April edition of Black Book.

This edition had been based on a mass of evidence indicating a buoyant market.

The downturn, when it came, was so sudden and steep that it rendered the book out of date almost from the moment data became available to customers. 

I was reminded of this last week when a customer suggested that Black Book has been consistently behind the market this year. Again, at face value, the charge is true.

But what it fails to take account of is the fact that many dealers and traders currently have a policy of paying ‘behind book’, regardless of the vehicle’s desirability.

Logic, therefore, dictates that actual market values are constantly forced below published guide prices by a risk-averse market. But how significant is the issue of traders under-valuing vehicles to protect themselves from risk in a falling market?

The CAP Dealer Insight Panel – a group of around 100 dealers – provides a clue as 75% of its members have a policy of paying behind book.

Clearly this means that any trade valuation guide is in the dangerous position of driving a weak market even further down if under-bidding is constantly reflected in published prices. 

Of course, the processes employed by price guides are more sophisticated than that. For example, there is inevitably an element of forecasting each month based on trends.

But when markets move dramatically and people are determined to drive prices down, it is impossible for a guide book to be ‘on the nail’ every day of the month – and perhaps naive to expect otherwise.

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