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CAP Trade Watch: Used car market finding its level

by Mike Hind, CAP communications manager

Just as last year saw a constant drip of bad news in the used market, 2009 has consistently delivered the reverse.

Such was the strength in the market that the March edition of Black Book’s historic average rise was soon left behind as supply constraints continued to fuel price increases.

A picture is emerging of the factors fuelling this, although there is one aspect that is proving more difficult to verify.

The shortage of stock tops the list. This time last year there were at least 10% more cars entering the market.

Record personal bank deposit withdrawals suggest that many consumers have, for the moment, given up on the meagre returns available to savers.

It is also believed that spending savings cash is one way consumers are getting around the ongoing difficulties in obtaining personal credit.

And there is strong evidence that retail demand for used cars is continuing to improve.

But the so far unanswered question is whether retail used car sales are really significantly outstripping supply or whether there is simply a good balance.

In other words, if dealers could reach the levels of stock they had last year, would there be sufficient business to keep that stock turning in 30 or 60 days.

Nobody appears to have a definitive answer.

Researchers for Black Book have continued to see strong bidding at auction but there are reports of some less desirable cars being passed over.

They have also noted during the past week (pre-March 17 – the time of writing) that some of the larger group buyers have not reappeared.

This suggests that the retail market may be reaching equilibrium.

The return of some cherry-picking and the occasional absence of a few buyers does not signal another downturn but rather that the market has found its level.

Used values have continued to rise and a further rise was anticipated for the April edition of Black Book.

Confidence among dealers remains strong, with the majority expecting stability or further improvement.

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