News Digest – Spring 2018 Update

With normal trading now resumed from the dark days of winter, both the car and commercial markets have remained stable this quarter, with some retail deals being done. Indeed the trade are currently very positive about the markets as a whole and see little change to this positivity for the rest of 2018.

But the overwhelming commentary from dealers at auction, for both cars and commercials, is that business is down, year on year. The SMMT estimate that new car sales have dropped around 4% year on year, following a 5% drop in 2017. So the overall position is declining sales for new, which is being partly reflected in the used markets too.

One of the issues is Manufacturer deals for new stock, which is taking buyers away from the used markets.

News Digest – Spring 2018 UpdateAnd as sales fall, these deals become even stronger, with typically )% finance and free servicing thrown in for 3 years. The used market cannot really compete with these deals, instead playing to the used buyer that simply cannot afford the often high deposits required for a new deal. Or they may need to cover a lot more than the, typically 10k miles per annum that is the norm for new deals.

But to counter the lacklustre demand for used product, there remains a scarcity of stock about, so prices remain stable for now.

And on a positive note, the Finance and Leasing Association has reported strong growth in USED Market PCP product, estimated to now be worth £7.5bn. This represents a growth year on year of 12%.

This is helping to stabilise the used markets in the face of increasing declines in the new markets. Long may it continue!!

Mileage Remains Biggest Threat to Value

The biggest issue in the used markets today though is mileage. We are increasingly seeing cars and vans coming back with well over 100,000 miles on the clock.

News Digest – Spring 2018 Update

Now, of course, the Book values are mileage adjusted, but such values are really mathematically calculated based on a depreciation model, so they are not real values, seen on real vehicles sold in the markets. And at any sale, just watch the buyers walk away from high mileage stock, leaving just a few bidders to compete to buy the vehicle. This will always result in lower sales values and, none more so than on cars. Anything with more than 90000 miles on the clock will not reach its Book value, as most traders will not even bid on the stock.

Scrappage Scheme Staring to Impact Used Markets

With a diesel scrappage scheme now in place, most dealers are offering £2000 plus on any cars older than 2010. And there is evidence that the schemes are now being adopted for LCV’s too. This is having the effect of taking volume out of the market, which does help prices for the remaining stock.

But of course it also removes buyers from the markets too, as explained in the previous section. It is interesting though that some perfectly serviceable vehicles registered before 2010 are being sent for scrap.

Diesel really is a very dirty word at the moment!!

New Model Updates

News Digest – Spring 2018 UpdateVauxhall have released images of their new ‘Combo Life’ 5 seater model, in their car range. This is clearly a PSA derived model, sharing everything except the nose with the Partner and Berlingo. Thus one could assume that this will be the shape of the new Combo van, when the current model share agreement with Fiat comes to an end.

That being the case, residual values should climb yet again for this product, to roughly the same as for the Berlingo van. The humbler Vauxhall Combo has come a long way in the last 5 years and is now a strong offering for most fleets. With the anticipated Vauxhall discounts, the new van should prove very popular indeed.

Mercedes have now announced a launch date of June for their new Sprinter range which, this time around is going it alone without VW.

News Digest – Spring 2018 Update

In our view it’ll be business as usual for this popular van, with residual values sitting where the current model lies. There is the usual caveat for the Sprinter though, as the used markets continue not to see such a huge premium for this van over and above its competition from Ford, Vauxhall, PSA etc.

Ford’s revised Focus range is one of the biggest new car launches of 2018, as this remains such an important model for Ford. And within its sector, the Focus is still the one to beat for many Manufacturers, thus everyone is keenly awaiting details of the new line up, due in September.

News Digest – Spring 2018 UpdateControversially, Fords have also announced that “diesel will remain their engine of choice” for the new Focus and other models, being somewhat opposite the view of other Manufacturers who are at pains to expel diesel engines from their line-up. Ford believes that they have diesels under control, with far less CO2 than petrol’s and, they claim with less NOx output than petrol engines. It remains to be seen how this plays out and is certainly very interesting when it comes to setting residual values for the new car. In my view, Ford do have a point, in that diesel may well not have a long-term future, but it surely does have a medium-term role to play in both the new, and used markets, whilst alternative fuels play catch up.