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Used car market analysis: January 22, 2010

Trading was strong between Christmas and New Year and although the winter freeze interrupted showroom traffic CAP believes there is still sufficient momentum to keep interest high and values strong during the first quarter.

It’s a view shared by many – aside from the gloom-mongers who claimed the weather was stopping the market in its tracks. This is partly evidenced by some wholesale disposers steadily raising their prices week- by-week.

This is in recognition of continued pent up demand and a widespread view that there is still plenty of business.

A revealing piece of analysis by CAP compared like-for-like trade disposals during the first three trading days of 2010 and 2009.

Prompted by anecdotal reports of extremely quiet auction halls, the results revealed that the difference in the number of transactions was less than one percentage point.

What is going on behind the scenes is a large increase in online bidding.

One major dealer group specifically analysed website traffic when snow and ice slowed down showroom traffic.

They found a significant increase in internet activity, both in terms of visits and enquiries.

It seems that potential customers were switching to the web while the weather kept them indoors, suggesting that there is still demand.

Even more important than retail interest is the level of supply versus demand and again CAP expects this to remain favourable in the short term.

Some disposers are controlling this in the expectation that they can continue to nudge prices up by not flooding the market.

And other factors are in play too. For example, another manufacturer is diverting a lot of small product away from the open market straight into bodyshops.

A surge in the number of accidents thanks to the big freeze means a big demand for courtesy cars.

For 4x4s the weather could not have come at a better time. This was highlighted by a Land Rover sale which saw every vehicle flying off the block at prices well ahead of CAP.

All these factors combine to indicate no severe issues in the market and therefore CAP expects trade and retail demand in general to remain healthy for the first quarter.

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