After further used price falls in May, the remarketing industry is reporting reasonable demand, but buyers are definitely shunning very high mileage stock and particularly those with excessive damage.
According to the Vehicle Remarketing Association (VRA), dealers are reluctant to pay top prices which has been fuelled by the recent sharp falls in the guides which, having dropped by over 6% in eight weeks, has created a sense of nervousness in the market.
Whatever their condition or specification, leasing and dealer members have told VRA there has almost been a total switch off in demand for cars coming back from lease extensions in excess of 100,000 miles, unless they are deemed as good value.
While gas guzzlers are certainly feeling the pinch, small, fuel-efficient cars at the other end of the market are in strong demand, reflecting the consumers’ reaction to the UK’s austerity measures.
Dealers are now significantly more cautious about their levels of retail stock and the profile of used cars they are purchasing.
They are also tending to keep a higher proportion of the slightly older, lower value part-exchanges for retail sale, particularly if the mileages are relatively low. These would traditionally have been disposed of straight away.
VRA believes this trend will continue for some time, as the effects of the weaker new car market translate into fewer good quality used cars being available.
Generally, retail footfall into dealerships has reduced over the past few months, but test drives and sales conversion rates are still quite respectable, suggesting there is still life in the market, with some serious retail buyers around.
VRA believes nearly new stock is likely to continue to be in short supply, despite some anticipated activity in the coming months with quantities of rental defleets beginning to enter the market. This is however, expected to be restricted to certain brands only.
The 4x4 sector is currently a story of two halves - the smaller engine, fuel-efficient models are holding up quite well against downward revaluation in the price guides, whereas the values of their larger, higher CO2 emitting counterparts are under big pressure as dealers report consumers struggling to reconcile the growing running costs in the form of increased fuel prices and tax disincentives.
On a more positive note, the used van market continues to hold up well, with strong prices in most main categories.
A number of the larger fleets are finally replacing their ageing stock with new vans which, in turn, is releasing much needed quantities of used stock into the market. These are being snapped up by the small business and self-employed sectors, who likewise have been holding off replacement, with many happy to buy three to five year old vans, in an effort to keep a lid on their operating costs.
In overall terms, the used vehicle market in late May and early June appears to be settling down again after a pretty torrid patch in March and April, but most values have now been adjusted as prices have found their own ‘new level’. There is certainly much more price sensitivity around in the wholesale market and sellers are being urged to be very pragmatic about anticipated values, particularly on those vehicles with excessive mileage and damage.