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Used car shortage set to drive strong values

Experts in the UK used car market agreed that the sector is settling down after two turbulent years.

Conditions went from almost red alert status as values plunged and dealers wrote down stock, to a highly profitable rebound as fleets held back from remarketing vehicles and the resultant stock shortage drove prices skywards.

So what is to come next?

The British Vehicle Rental and Leasing Association sees a number of key factors influencing the remarketing sector over the next year. 

Toby Poston, head of communications, said longer leasing contracts will have an impact on the type of used stock. He expects a shortage of nearly-new stock as rental fleets shrink and vehicles are run longer.
“We should be aware of attempts being made to talk down the used car market,” said Poston. “With new car registrations likely to stay down, a shortage of used vehicles is likely to underpin strong values.

“The Government spending review is likely to boost the used market. As we see public sector fleets reduced, many civil servants may buy quality used ones.”

Poston said the BVRLA is working with the Office of Fair Trading to try to make consumers aware of the benefits of buying ex-fleet and rental cars. Another influence on the remarketing sector is car manufacturer product activity.

“Some of our members say the ever-increasing number of new model and trim changes delivered is making it very difficult to set accurate residual values,” said Poston.
Major auction houses BCA and Manheim agree the market looks to be stabilising into traditional seasonal patterns.

BCA director Tony Gannon said: “Prices are likely to remain firm in the short term.
“But if, as we believe, this year is seeing a return to seasonal norms, we expect to see values under more pressure from late September until Christmas.

“If anything, this underlines the resilience and strength in depth of the used car market, which outstripped new car market values by £6 billion last year.”

Manheim Remarketing managing director Mike Pilkington said: “With additional economic pressures to run fleet vehicles on longer contracts, it is inevitable older vehicles with higher mileages will go to auction.

“The stability of dealer part-exchange values suggests an underlying strength in retail demand for budget cars.

“If the market is becoming more traditional, the way the industry approaches the market certainly is not.”

The UK vehicle remarketing sector is changing. Travelling to an auction on a bleak winter day was never enticing for dealers and now it’s not essential. Online buying is rising fast and UK auction heavyweights BCA and Manheim are competing with specialist online rivals.

Other alternatives to traditional auctions are being tested.

Closed auctions have been around for ages: now dealers are invited to hotels to sit in easy chairs, sip a drink and bid for stock shown on a big screen.

It’s also a useful opportunity for car-makers to build a bond with their franchised retailers.
But what are dealers’ top priorities when choosing auction companies to buy or sell stock?

BCA’s Gannon said: “Our research shows it’s timely, accurate and useful information on what vehicle is being sold where and when. With that dealers can plan their buying activity, online or by attending a sale.

“Used cars are going to be the battleground for dealer profit for the foreseeable future, and battles are won with good reconnaissance, excellent supply lines and the best quality and accurate information.”

Gannon said BCA launched its new website in June because online marketing is critical to the mix.

“Increasing numbers of pressure points in terms of age and condition of vehicles means helping dealers to source good quality, ready to retail stock will be critical to success.”

BCA expects to sell more than 100,000 units to all-trade online bidders this year in the UK, a 30%-plus year-on-year increase. It quotes Experian Hitwise in claiming it takes more than half of the UK’s vehicle remarketing sector traffic, with more than 4,000 trade buyers a day and 85% of them using the site regularly over a 24-hour period.

BCA launched Live Online, its internet bidding service, a decade ago. Gannon said: “Bidding online cannot currently replicate every aspect of physically being in the auction hall and seeing the vehicle sold, but it is getting better and better at conveying the activity and excitement of the auction experience.”

BCA has a UK network of 21 centres, plus 24 in 11 mainland European countries. Gannon said: “The quality of the physical auction network is critical to success and we have led the industry for many years in building better-equipped and more comfortable business environments for our customers.”

Manheim Remarketing has been active too. A new service, Manheim Direct, offers trade buyers the chance to buy via phone or website (with a live chat facility) from a rolling stock of up to 1,000 vehicles each day. This replaces VRS, Manheim’s previous trade sales operation.

Vehicles sold come from major fleet and leasing companies, and manufacturers. Stock is located at Manheim Direct’s 16-acre headquarters at Coventry and at some of its other auction centres.

Manheim Remarketing has also launched a new website, and claims a first in UK remarketing because it allows trade buyers to search for all stock in all its sales channels from one location. 

This includes physical auctions, live links to auctions as well as ‘buy now’ stock from Manheim Direct and a range of other electronic auctions.

For the past year Manheim has also offered dealers the prospect of improved cash flow.
Seller Advance is designed to improve the quality of valuations and provide an upfront payment service. 

When a valuation is agreed, and the deal secured, the vehicle can be sent to auction at the click of a button.

After inspection, the valuation is paid the next working day. After the vehicle is sold, the difference between Manheim Auctions’ advance payment and the winning bid is balanced within a week. 

Pilkington said Simulcast, the company’s online bidding service, continues to grow: “It is recognised as a trusted and reliable business tool that complements physical auctions by bringing benefits to both buyers and sellers.”

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