The first signs that used car values, which have been high for several months, are beginning to fall are emerging after the latest BCA report showed a fall in average values of over £200 in May.

Average values fell from £5,871 to £5,656, while performance against CAP Clean fell by one and a half points.

This indicates that dealers are now no longer willing to pay the high reserves being set at the auctions for used cars.

Year on year values are now behind by £117 - the first time the market has seen this since February 2009, underlining there has been a significant shift in market dynamics over the past eight to 12 weeks. 

“There has been a subtle and seasonal slowing of demand in the used car market over a number of weeks and we reported on this factor last month," said BCA’s communications director Tony Gannon.

 

"There has also been an increase in supply, partly made up of genuinely incremental fresh stock, but also including an increasing proportion of re-entered stock.

"This month we are seeing the effects of that across the market – average prices have fallen, and were lower in May 2010 than they were in the corresponding month in 2009. That is the first time in seventeen months we have seen year-on-year values in decline.”

In the critical fleet sector, which tracks the values of ex-lease and fleet cars that are sold through auction, values fell from £7,871 to £7,428.

Values rallied marginally in the part exchange market from £2,592 in April to £2,619 in May, and nearly-new values continued to rise – from £19,752 to £20,393 - on the back of slim volumes and a series of high profile sales.

“The fleet sector has seen most of the pain in May," said Gannon.

"Values fell by £443 to £7,428, equivalent to a drop of 5.6% over the month. Meanwhile, performance against CAP Clean fell for the second month running, from 96.9% to 94.86%, which reflects the market and CAP’s lack of response to it in May.

"In addition, we are now seeing some of the extended-contract vehicles coming back and the average age at remarketing has crept up by around a month – this will also affect values.

"We have been telling our customers for some time that we expect prices to stabilise in 2010 and for the market to assume a more traditional pattern. Values cannot rise inexorably – common sense suggests the market will have peaks and troughs in the typical annual cycle. It’s just that it has been some time since we experienced a trough.”