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Tight supply keeps auction prices high

A shortage of good quality, ex-fleet used cars is likely to keep used car prices high at least until the final quarter of the year, according to Roger Woodward, managing director of online auction, CD Auction Group.

Woodward said his group has already seen ex-fleet vehicle volumes at auction drop by 15% to 20% in the first quarter and that means buyers are having to pay more to secure the right stock for customers.

He said: “There are some early signs of a recovery in the new car market, which is good news for the industry as a whole, but that won’t affect the core business of used car selling in the next few months.

“If you go back to 2009, fleet sales were down just over 20% in the year as a whole and almost 30% in the first six months. Those are the cars which are now coming back, or rather not coming back, to the used market.”

As a result, CD Auction Group has seen typical auction prices rise by a couple of percent of CAP Clean in the last two weeks. Higher values are commanded by premium brands, such as CD Auction Group’s monthly online BMW sale.

However, professional buyers are being selective and Woodward says some fleet vendors might be tempted to release more cars into the current market.

“The market is still tight so condition and specification remain critical,” he said. “We know some fleet operators are tempted to extend contracts and that is adding to the supply issues. Actually, they might be better off letting the cars go now and taking advantage of the strong demand and firm values.”

According to Woodward, the current supply situation is likely to prevail until the final quarter of 2012, or even the beginning of 2013, since fleet sales did not start to recover until Q4 of 2009 (up 4%).
 

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