AM Online

Dealers find little to cheer about

Independent dealers remain the best barometer of the used car market.

If the behaviour of franchise dealers was the sole evidence on which to base an assessment of market conditions we would now be thinking that the clamour for used stock represented a surge in retail demand for used cars.

However, the most recent information from the independent sector indicates that used car retail business is at best stable and at worst poor.

Only 58% report that business is ‘stable’ while 38% describe conditions as ‘poor’. They continue to have difficulty acquiring the right cars for stock, but this is because of increased competition from their franchise counterparts rather than struggling to meet retail demand.

This is indicated by 65% reporting difficulties in buying stock of sufficient quality. There is little expectation of any significant improvements with only 29% expecting growth over the next quarter. The majority are not as confident, with 43% expecting little or no change and 27% predicting a decline.

One of the challenges of identifying hard and fast rules around the dynamics of the used car market is the way conditions change in direct response to new developments.

A recent example of this was identified at CAP during work to establish a formulaic relationship between late plate supply and used values. The used market of the past two years has proved that its dynamics are clearly linked with new car registrations.

Earlier this year, when there were strong signs of a return to pre-registering, the used market dipped. The interesting aspect of this emerges when analysis is conducted into the precise relationship between new car supply and used values. Intuitively one might expect surges in supply of late plate product would therefore accompany a reduction in used values.

However, when the market of 2009 is examined more closely it emerges that late plate supply grew as used values increased. However, a knee-jerk conclusion that there is therefore no relationship between rising late plate volumes and falling used values would be mistaken.

Disguised behind these figures was another dynamic which was established as a direct result of the rise in used values. Quite simply the market was responding by placing more late plate product into the used market to take advantage of the wave of demand.

Manufacturers are believed to have diverted supply that might normally have gone straight into dealers and onto the open market to benefit from the price surge. CAP remains confident that the key to stability in used values is a certain restraint in new product supply.

But identifying a fixed formula that might predict this remains the subject of detailed work.


If you are not a registered user your comment will go to AM for approval before publishing. To avoid this requirement please register or login.

Login to comment


No comments have been made yet.