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CAP Trade Watch: Market edges towards stability

Following the series of unprecedented rises in the value of used cars during the first quarter of 2009 it seems that the market is now settling into something closer to stability.

Black Book for April recorded a rise in average values of 6.8%, the largest single increase in its history.

Despite the remarkable about-turn, this year’s surge in trade demand and the consequent upward pressure on prices has only returned values to levels seen during November.

Based on three-year-old prices, therefore, the market remains significantly weaker than a year ago.

With a scrappage scheme agreed, discussion has centred on the impact of the incentives in other European markets.

One appears to be the diversion of some stock originally destined for the UK.

Dealers say UK waiting times for one mainstream model have increased to 12 weeks following the switch of production of 15,000 right-hand drive cars to left-hand drive to capitalise on the surge in new sales on the Continent.

There is also evidence of an increased focus in the UK on nearly-new cars by some manufacturers who are increasing the incentives for dealers to acquire used stock direct from the maker.

The tool being used is dealer standards payments, with around 10% of these payments being awarded for sourcing a set amount of nearly-new stock.

nfortunately, because of the shortage of stock, prices have risen to such a level that the manufacturer payments are insufficient to off-set the sheer expense of acquiring such stock when retail margins are not increasing.

Looking ahead to the next edition of Black Book, it seems disposal prices are now closely in line with CAP.

Early analysis of raw disposals data suggested, mid-month, that a further substantial rise for May would be extremely unlikely.

However, as recent history has taught us, the market is always capable of delivering a few surprises so I would caution that ‘never say never’ is the most sensible approach.

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