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Winter lull predicted for used car prices

Used car prices have now stabilised following month on month rises and there is now the prospect of falls in values of up to 4% during the final quarter of the year, according to the valuation team at Glass’s.

Although a drop is predicted it’s much smaller than Glass’s was originally predicting for the end of the year.

Tighter margins, the influx of September ‘plate-change’ trade-ins, and the onset of a quieter sales period have contributed to the halt in trade price rises, following an increase of 30% for mainstream models during the last 12 months.

While prices have fluctuated with the seasons in 2009, the nature of the shifts is without parallel this century.

The early spring peak in price rises was particularly exaggerated, and even the seasonal decline normally associated with the quiet summer months was replaced by further price hikes.

Adrian Rushmore, managing editor at Glass’s, said: “The improvement in prices this year was largely due to the much lower level of used-car supply.

“It is apparent the correction is complete – in other words, the trade price of a car, plus a dealer margin, now equals the retail price that customers are willing to pay. However, there are already signs that some dealers are displaying vehicles with smaller margins in order to ensure that would-be buyers are not discouraged by price.”

Dealers have reported concerns that retail sales are likely to slow from early October.

Rushmore said: “They will have paid very high prices for their stock and will be mindful that, if retail pricing action becomes necessary, they will be further reducing already-tight margins.

“The increase in used-car supply generated by sales of the ‘59’-plate will be relatively small compared to recent September plate changes.”

Rushmore warned dealers to stay alert to the trading market as the industry would be moving into a “testing period of used-car trading”.

He advised: “If we are about to see the imminent arrival of fleet cars from extended contracts, vendors must recognise that high-mileage cars in need of refurbishment are not favoured by trade buyers in a less active market.

“Past experience has demonstrated that the rejection of realistic auction bids merely leads to lower bids at future sales. It is no one’s interest to create a downward spiral of prices.”

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