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CAP reports an end to stable used car values

A long period of stability in used car values has given way to falling prices in the trade, according to CAP’s Black Book Live tool.

An increase in vehicle volumes lies behind the market change, leading to ‘cherry-picking’ of the best stock in the trade, while less attractive cars are forced down in value.
CAP cautions against alarm, however, arguing that a downturn was inevitable following a long and “almost unnaturally stable” period during which some even increased in value.

The increase in cars available stems partly from the success of new car dealers – as the UK gathers pace as Europe’s ‘hot spot’ for new car sales – taking in large numbers of part-exchange vehicles, which are often immediately traded out into the market.

According to the latest Black Book Live market commentary new car showroom activity has been as much as 20% higher than at this point last year and one large dealer group last month reported its highest number of part-exchanges for four years.

Short-term volumes are also expected to flow into the market from other sources, such as fleet and rental operators, but CAP expects this to ease over the coming months.

There is therefore no sign that the long-term shortage of prime retail-quality stock from fleet vendors, predicted by CAP, will be avoided.

Meanwhile, CAP predicts nothing more drastic than normal depreciation patterns in the mid-term.

Derren Martin, senior editor of Black Book Live, said: “As we predicted last month, the status quo for used car trade values appears to be over for the time being, but the fact is that the market has not gone into free-fall.

“The increase in volume from part-exchanges and fleet car replacement activity has led to prices coming under pressure for the first time in many months.

“Rather than being alarmed at the return of the all-too-familiar pattern of falling car values we should acknowledge that, with increased volumes in the marketplace and strong new car offers to tempt some buyers out of the used market, total stability was always going to be unsustainable indefinitely.”

Martin said now sectors are immune, with even the city car segment feeling the strain. SUVs are on the slide and convertibles have peaked after strong increases earlier in the year.

He said: “Not all cars are falling in value and the best – especially those which require little investment in preparation for the forecourt – will continue to command CAP Clean values or even higher.

“There is some disagreement in the market on how long the current dip in trade values is likely to last because experiences are mixed, among professionals in the market. Some are reporting increases in stock and decline in demand while others are reporting that business is strengthening.

“Our view is that this is a short-term phenomenon, with no reason to expect a long-term decline.”

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