Monthly News, April

Used Market Place Trade Talk

This turned out to be the month that the market changed.

XBG LVC and Car StockAfter several years of strong growth in both the LCV and Car used markets, driven mainly by a lack of stock, the tables well and truly turned this month at auction. There is now plenty of LCV and Car stock to choose from.

This glut of stock appears to have been driven by the March plate change, which has generated a quantity of part exchange stock. But perhaps more importantly, this has also generated a fair amount of LCV and Car pre-registered stock at dealers, as Manufacturers all struggle to meet their first quarter registration targets.

All of this dealer activity does have an impact on the used markets, in two ways.

Firstly, many potential used customers are being tempted with massive discounts on new product; the availability of PCP finance packages also helps to make new vehicles affordable, in both Cars and LCV sales. Secondly of course, dealers are now awash with stock, which is preventing them from going to auction and buying used stock. With more and more cars and LCV’s arriving at auction every day, many sites are now filling up fast.

Polling StationThe general election is also now beginning to have an impact, now that the official campaigning is well under way.

Whilst we maintain our view that this will not have a massive impact on the markets, there is a noticeable lack of retail demand at forecourts this month. Dealers are putting this down to the election, with many delaying punters delaying that buying decision until the results are known.

As a result of all of this new activity in the markets, we found a noticeable lack of buying activity at auctions, with many traders simply standing back and watching the sale, rather than bidding.

A further, very noticeable change this month has been the reluctance to buy anything with too many miles. LCV’s with more than 90,000 miles are now really struggling to sell. For cars, it is even lower; anything with more than 80,000 miles is also struggling to find any buyers. And if damage is also present on those high mileage vehicles, they are virtually impossible to sell at the moment, for anything close to Book money.

It is our view that, as ever, Book has a huge role to play here, as they do not accurately reflect the large differential in price between normal and high mileage.

The table below shows the difference in Book values and real values at market currently:

Make/Model RV @ 5/50 RV @ 5/100 Difference Actual Difference
Transit 350 LWB High Roof £5,800 £4,425 £1,375 £2,000
Connect T230 LWB £4,275 £3,250 £1,025 £1,475
Vivaro 2900 SWB £5,100 £3,850 £1,250 £1,900
Insignia 2.0CDTi Exclusiv £4,925 £3,850 £1,075 £2,125

The table shows the difference in values between a 5 year old 50,000 mile vehicle and a 100,000 mile equivalent. The actual difference has been calculated from actual sales prices or estimates of the vehicles worth in today’s markets. All of the examples given are way out of kilter and, that is the truth of it at market today. High mileage vehicles are becoming increasingly harder to sell unless they are very cheap indeed.

Why? Well the answer lies in the re-introduction of cheap finance packages in the retail sector, as we have been reporting for many months now. This has enabled the buying public to get into much newer cars and vans, leaving the older, high mileage vehicles for the cash buyers.

So what is the way forward amongst all this doom and gloom?! Well we think that the markets will bump along until after the general election, when demand will increase once again. With the traditional slowdown in supply over the summer, prices will be restored to a reasonable level. But again, we have been warning for some time that prices in the trade Books have been at an all-time high for several years now, and so they will have to fall back now that markets are returning to a normal pattern of supply and demand. Adjustments are inevitable, going forward for the remainder of this year, so do not be surprised to see fairly large drops in values month on month, from the guides.

Independent auctions

On a more positive note, we continue to experience great results from our smaller, independent auction sites, none more so than at South Western Vehicle Auctions in Poole, seen above with a sale in full flow.

Because we are a fairly major player in the sale and, the only vendor to actually attend and manage from the rostrum, we always get great results there.

There is also the fact that their Tuesday sale starts at 16.00 means that they do not clash with any of the larger sites. Thus buyers will and do come from London, Wales and the South West. In addition the site attracts many end users, on their way home from a day’s work and looking for that replacement van or tipper.

launch sale of Wilsons Queensferry PlantAlso this month, we attended the launch sale of Wilsons Queensferry Plant and Equipment sale, where the results were extremely good, rivalling Brightwell’s Madley site.

Transit 350The Transit 350 vans with on board power were very well received, as were a batch of 4×4 Pickups that we also entered. Time will tell of course, but this looks to be a very interesting addition to the North West auction scene.

Last but, by no means least, there is a rising head of steam concerning residual values on diesel engine cars. For the last 4 decades, successive Governments have all but forced fleet and company car users into diesel cars, favouring their low consumption and CO2 figures over petrol engine variants. Manufacturers have played their part through innovative technology to further improve the efficiency of diesel engines.

But now the tide is most definitely on the turn, in favour of petrol engines. Political pressure is now being applied from environmental groups concerning the noxious gases put out by diesel engines, which have long been known to be harmful to health. Paris has now declared that they will ban all diesel engine vehicles from the centre by 2020. No doubt London will very quickly follow suit.

Skewed taxation on petrol and dieselWhatever Government we end up with, it is becoming clear that taxation will now be skewed in favour of petrol, over diesel.

So where now for diesel RV’s? Well they certainly cannot drop instantly, as clearly the Industry will take some time to start the switch back to petrol, but it is evident that residual values will slowly start to fall on diesel engine cars. We will be keeping a keen eye on the situation over the coming years, to best advise our clients on forecasting values. And, no doubt, this will also start to impact on LCV’s too.