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CAP trade watch: Used car market is on the up

The widely voiced complaint of good used car stock shortages is one sign that the used car market in general has taken off with some energy this year.

Every indicator used in the monthly research for CAP Black Book shows strength and positive trends. Month-on-month measures of showroom traffic and retail sales show that the market has consistently improved since the start of the year. Perhaps most revealing is that year-on-year measures show an increase on the same period in 2007.

There is stiff competition for stock and cherry-picking has been less of an option for many who find they have no alternative but to buy some work if they are not to be faced with empty spaces on their forecourts.

CAP’s research reveals a positive mood across the market and a desire to consolidate rather than risk the old boom and bust cycle. Lease vehicle disposers are also reported to be setting their reserves at appropriate levels, which is helping to keep the market moving rather than seeing the same cars go through the sales repeatedly with no bids.

Although significant increases in volume returns are expected in the coming weeks, stock shortage has been one of the biggest issues during the first quarter of the year.

Only 34% of dealers researched during the first weeks of March agreed with the statement “there is plenty of good stock available” while 65% reported that good stock has been hard to find.

However, strong retail demand is not generally pushing retail sticker prices up. Latest research suggests that 17% of dealers are advertising cars at higher prices than a year ago. In contrast almost a third say their average advertised price had reduced and 51% report little or no change. With preparation costs and overheads constantly rising, it is clear that dealers are having a challenging time, regardless of market conditions.

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