AM Online

Used car market remains buoyant after increased trade buying, says CAP

Increased trade buying activity during the latter part of May signalled underlying strength in the used car market, according to CAP.

Although general trade values have continued to slip – following an unusually long period of stability – the current CAP view is that increased wholesale supply has not turned into an oversupply scenario.

CAP’s latest market view is based on daily monitoring of trade transactions during May for Black Book Live, the real-time used values trending tool.

Black Book Live observes that the reduction in total volume caused by the 2008/09 slump in registrations is now helping to prevent oversupply. Despite an increase in supply this year, overall numbers are still down on pre-recession levels.

Auction conversion rates typically increased by around ten per cent during May, compared with the end of April, although the determination of some fleet vendors to hold out for higher prices has been resisted by dealers who are equally determined to pay prime prices for only the highest quality cars.

This has resulted in some fleet sale conversion rates as low as 50% and dealer part-exchange sales converting as high as 80%, when reserves were set at what trade observers describe as ‘realistic’ levels.

The general condition of cars in the open market remains the principle concern of dealers seeking the best examples for stock. Because a relatively low proportion of cars are in genuine ‘CAP clean’ condition, dealers are expected to have to increasingly bite the bullet on reconditioning less-than-perfect cars if they are to continue meeting strong retail demand.

Despite the usual fears that a drive for heavily incentivised new car sales tends to impact late plate cars, little evidence has emerged so far of increased pressure on nearly new values. It is an area being watched by CAP with keen interest, however.

Derren Martin, Black Book Live senior editor, said: “Self-registrations remain a feature of the market because of an insatiable desire by many manufacturers to maintain or improve their market share.

“Anecdotal evidence is suggesting that self -registrations are accounting for around 20% of monthly reported registration totals.  However, we are not seeing any discernable negative influence on the values of late-plate used cars.

“It may be that this activity is now so well established that the relationship between prices of new and late used has reached equilibrium.

“What is interesting is that the number of cars being sold at the traditional three-year point has decreased fairly dramatically over this period.

“In 2008, 20% of cars sold were between 2.5 and 3.5 years old but in 2014 that percentage has fallen to 13%. Conversely, six years ago around one-third of sold cars were over six years old while now the figure is more than half.

“Businesses and consumers alike have clearly been holding onto cars longer during austere times.”

Click here for used car best practice and procurement insight

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.