Market Review
Whilst the Government eased restrictions back in September, with the Covid virus seemingly under control, it seems that as we now head into deep winter the numbers are again spiraling ever upwards. Pressure on the hospitals could result in further restrictions being put in place which, in turn will impact on the used markets.
However, as we have learnt during the last 18 months of this pandemic, any restrictions simply appears to feed even greater demand for stock!
The level of stock being fed into both the car and LCV markets remains at an all time low as we progress through the last quarter of 2021 and into the first quarter of 2022.
The summer months did see some returns with auction forecourts beginning to fill after the severe shortages experienced earlier on this year, but the car stock at least is mostly much older examples, some of which could be considered ‘life expired’. The LCV situation is slightly different although, for the most part stock remains desperately short around the country. But what stock does show up is predominantly direct from Fleet and Leasing, where some new vehicle supply has arrived to produce ‘replaced vans’.
When direct fleet stock does appear at auction they are very keenly bought, with some fierce competition ensuing. Whilst the usual caveats apply regarding excessive damage and heavy mileages, the trade are noticeably less fussy as they seek to own any available stock. Their mantra is simply to find stock to keep their forecourts going and satisfy the retail demand, with Euro 6 vehicles being particularly popular.
Many major auction houses have vastly reduced entries now on a weekly basis. At some of the bigger sites, where a usual weekly entry of cars or vans could be as much as 300 of each, sales at this moment in time are sometimes reduced to less than 100 vehicles.
Some independent auction houses are suffering too, where their entries in normal times are around 100 vehicles per sale, they are lucky to muster 40 – 50 vehicles per sale currently.
All of this pressure on stock leads to one inevitable result, ever increasing used vehicle prices. According to recent figures used car prices have risen year to date by an average of 27%; in cash terms, on a typical 3 year old 60000 mile car this equates to an additional £3500 in the sale price.
For vans those figures are less, with a year to date average increase of 14%. In cash terms the average additional sale price equates to approximately £1600.
Whilst those figures are impressive enough, they are increases on top of the over 20% increases that we saw in 2020, since the start of the pandemic.
With these significant increases in used values comes a fragile wholesale market place, where dealers and traders are becoming increasingly nervous about paying over the Guide levels. There is a fear that prices will eventually plateau and maybe drop, leading to over priced stock at the forecourts. Some dealers have even resorted to just buying to order now, rather than stocking up the forecourt and awaiting buyers. That is certainly a safer way of trading but will not enable those dealers to maximise their income from visiting retail customers.
Car Markets Busy
In the used car markets, retail transactions have increased significantly from a slightly subdued market back in June, which was to be expected at the start of the holiday season. However activity at the forecourt is well ahead of any previous Q3/Q4 period in recent years, as people look to acquire their next car often upgrading because they are able to do so. There are what the industry has termed ‘accidental savers’ active in the used car markets, which are those people that have amassed some considerable sums of money over the frequent lock down periods of the last 18 months. They are now looking to spend some of those savings, much of which is being used to purchase cars.
This situation has not missed the franchise dealer networks either, as many of them are now turning to used car retailing to replace the still patchy new car supply. Used product sales have become vital to maintaining profitability for many dealers, franchised and non- franchised alike.
All of this activity is of course reflected at the auction halls, where stock is selling very well indeed.
LCV Markets Remain Steady
General LCV stock is still selling and, if it comes direct from a major fleet remains very popular with the buyers. Vans such as this 4-year old Ford Connect L2 with a very useful roof rack from the Sky fleet made several hundred pounds over CAP Clean this month, along with many of its sisters.
Such prime retail stock is being snapped up by main and independent dealers alike as they are fairly easy to sell, such is their pedigree. That of course remains the case with our client stock which is for the most part direct from fleet and with full documentation, so we continue to experience some very good sales.
The trade are most definitely avoiding any stock that has heavy damage, non-running or have something unusual about the specification.
Fully wrapped vehicles is one issue, if the wrap has not been removed prior to sale.
The trade know just how long this will take and the amount of work necessary to bring the paintwork underneath back up to scratch. As a consequence, they will bid way below Book on such vehicles, if they bid at all currently.
Specialist vehicles are still selling ok though, with tippers of any description making very strong money. Dropsides are still selling for Book money although any issues will cause this price to fall. Luton bodied and to a slightly lesser extent box vans on 3.5-ton chassis are proving popular too, as demand for such stock ramps up towards Christmas.
Buses of any description and age are selling very well indeed as the bus and coach industry continues to recover now that schools and colleges have fully returned.
The sale of ‘lifestyle’ stock such as the Vivaro and Custom seen below remains an exceptionally strong area of the LCV market, with most examples making fortunes.
4×4 Markets Now Stable
Following recent years where massive over supply has created pricing issues for the 4×4 pickup markets, many Manufacturers have now left this sector behind. Fiat, VW, Nissan, Mercedes and now Mitsubishi have all stopped producing right hand drive versions of the 4×4 pickup, therefore leaving the UK markets. This clear-out from the once crowded 4×4 pickup markets has left a much more stable situation at today’s auctions, where pickups are once again commanding small to medium premiums over their Book values. The main Manufacturers that are left in the UK markets, namely Ford, Toyota and Isuzu now have a buoyant new market into which to place their products, with some assured residual values to enjoy going forward.
Mitsubishi have of course pulled out of the UK market entirely, for cars and commercials vehicles with all dealerships and their Head Office in Cirencester closing. Interestingly, their entire collection of heritage vehicles was auctioned off in April with no reserve. The start performer on the day was this Lancer Evo VI
Tommi Makinen Edition from 2001, which made just over £100000 on the day!
HGV and Plant Markets Remain Solid
The used trucks and plant markets have really excelled in this latest period, with extremely strong money being paid for the right stock.
Anything Euro 6 is selling well, regardless of the body on the back. Dropsides, tippers and specialist bodies are making fortunes over the Book values owing to the scarcity of new vehicles.
Older stock is also selling although for various reasons. Some more specialist trucks with Euro 5 engines or older are finding new homes and, anything in the 6×4 tractor unit markets are making extremely strong money.
This Volvo FM comfortably made well over its Book value at a recent sale, because like any older trucks with a desirable specification it is going abroad. The export markets are very strong currently and technically relatively straightforward trucks such as this one are very popular amongst the exporters, especially with the ‘double drive’.
The same goes for plant and equipment, as much of the items sold are going for export, if they cannot find homes within the UK.
Plant and Equipment Sales
As has been the case all year, any equipment entered for sale at auction directly from major fleets is fetching very strong money. There is not necessarily a shortage of such stock at markets, but the voracious demand for used plant and equipment from the fleet world remains very strong, resulting in very competitive bidding at all sales.
Road trailers too are now fetching good prices at market, which is due to a lack of volume and the difficulty in now securing new trailers within any reasonable lead times. It seems that the shortage of component parts for new build construction is now affecting the trailer sector of the market.
Curtainsiders and specialist trailers, such as the walking floor tri-axle example seen below, are some of the most popular with the trade now paying nearly double their values of just 6 months ago. The difference in the trailer markets is that any volume increase will quickly suppress demand.
Book Prices Continue to Rise
Because of the shortage of stock at all markets currently, the Guide Book prices continue to rise month on month although, for the first time in nearly 2 years August saw no real price increases, with most prices remaining the same. Simply whatever a trader pays at auction for a vehicle, car or commercial, there has to be a retail profit margin applied to sell that vehicle on to a new owner. Those margins remain the same which means that the average retail sales price has also increased by the same amounts year on year.
This snapshot below is for a 65 plated VW Caddy van with 36000 miles recorded; the clean trade price a year ago on this same van at those miles was just £6875!
However once volumes pick up to more normal levels, those prices might begin to decline. The big question is if they do, how far will they fall, will it be back to pre-Pandemic levels, i.e. over 30%? If that happens many dealers and traders could be left with stock that is overvalued with the profit margin completely eroded, forcing them out of business. The stakes are high which is why many traders at auction are desperately trying to bring prices down but, with the shortage of stock continuing that is not happening currently.
Auction Sales
Whilst most auction sales remain online only, some of the independent sites have now re-opened their doors.
Aston Barclay were amongst the first to open, holding their first physical sale earlier in the year.
With all of the requisite Covid19 regulations in place, the sale was a great success and well attended. Our stock sold very well, although interestingly some 35% of the section still sold to online buyers. Geoff Flood, National CV Manager for Aston Barclay reckoned there were more online buyers registered than in previous physical sales, so with the physical audience as well the results were very promising.
The only other centre to re-open currently is Shoreham Vehicle Auctions although, this was by invitation only thus excluding the general public for the time being. Manheim Auctions will not make any decision on a return to physical sales until next year.
BCA have confirmed that they will not (ever) be re-opening any of their auction centres to physical sales, having already removed the rostrum structures in their Manchester Belle Vue site. Many in the industry see this as perhaps a move too early with many traders eager to get back to physical sales. Some Vendors too are insisting on physical sales for their products, so time will tell whether this bold move by BCA was the right one.
NEC Motor Show
I am struggling to write much about this show at the NEC during the first week of September, such was the weak nature of it. Many exhibitors were missing, including all truck manufacturers. As a result, the show was held in just 2 halls, one of which was very small and half empty.
I am not sure how much ‘business’ was done at the show but I cannot imagine there was much to do.
What was interesting was the lack of ICE vehicles at the show. Aside from Landrover with their new Defender and a few sporty versions of the Transit and Connect, everything was electric.
Of interest was the much-anticipated LEVC hybrid electric van, seen below on one of the bigger stands at the show.
Clearly derived from the London Taxi version, the 1-ton payload of the van was very impressive, with a size cube area and a claimed range of over 300 miles. Electric range is apparently 58 miles.
The build quality of the vehicle also looked ok, although time will tell of course.
The quoted residual value of the base version sits at an impressive £11750 after 3/60, which is very much nearly on a par with the Peugeot eExpert (at £12300), probably one of its closest competitors.
The Maxus (formerly LDV) stand proudly displayed a 3.5-ton van which is clearly based on the Transit 350 body.
Seen below, the van was not a Transit shell but a home (China) produced version of it. The entire range of vehicles on display were all electric too with this electric version of the Model 9 High Roof van having a quoted 3/60 residual value of a rather strong £13000. Quite how the build quality of the Maxus stands up to 3 years of hard use remains to be seen, but 3-year old versions of the LDV Maxus van currently at used markets does not seem to fare well.
The only all ICE range of vehicles at the show were to be found on the Landrover stand, where workhorse versions of their new Defender could be found in both short and long wheelbase versions.
The build quality and specification of the vehicles on display were certainly impressive but, for a quoted residual value of £16225 after 3/60 for the base model 90 van, so it should be! But as we know, residual values of Defender have traditionally outperformed the markets consistently – will they continue to do so with this new model? Only time will tell.
This very impressive 8×4 Scania Tanker was one of only a handful of trucks at the show, and this was on the Bucher Municipal stand, not the manufacturers.
This cut away version of the Citroen Hydrogen Van attracted much interest at the show.
Many commentators within the industry are now pointing towards Hydrogen Fuel Cell as the preferred choice of drive for LCV’s in the future with electric vans being somewhat of a temporary fix, until such time that the Hydrogen infrastructure is put into place. Time will tell but certainly Hydrogen has the major advantage of no range anxiety to worry about for the LCV operator. The CV show is already booked to run again in 2022, let us hope that there will be more support for it because based on this years’ experience, it is hard to imagine that it would be cost effective for anyone there.
Classic Markets Very Busy
The classics market has remained very busy for much of 2021 with many record sales noted. It seems that some of the ‘spare cash’ that people have amassed over lockdowns is being spent on that dream of owning a classic car.
The South Western Vehicle Auctions recent classic sale was extremely successful, with nearly all of the lots entered finding new homes.
As has become the norm now for this interesting sector of the markets, it is the 1970’s, 80’s and 90’s classics that are attracting the most attention from buyers, as they relive their earliest motoring memories. As a consequence, some earlier cars are now beginning to suffer in terms of value, with even the iconic E Type Jaguar seemingly peaking in value now.