Now the dust has settled following the late Monarch’s funeral in September, there were signs that the public were returning to the forecourts and in reasonable numbers. That was until the full implications of the Chancellors ‘Mini Budget’ later in October dawned on people, with much media hype surrounding mortgage repayments doubling by this time next year, energy bills rising in January and much more. Once it also became clear that the Bank of England, the International Monetary Fund, and other well respected financial institutions all raised their own concerns as to the wisdom of the Conservatives’ plans, the public retreated back indoors once again. The subsequent retraction and U turn within days of the original announcement did little to improve the public’s confidence and so, the quarter remained a fairly low key affair as far as forecourt sales were concerned.
This has all produced used markets without much change again this time, with the sudden spike in demand seen in mid-September all but gone now.
Thus, forecourts are reported as ‘quiet’ and in some cases ‘very little trade’, giving rise to more stock now turning up at auctions.
Admittedly for both cars and vans, the auction stock is ageing, with the vast majority of the offerings being Euro 5 diesel or older. Notably, the part exchanges from dealers have really picked up as they seek to trade out of the less desirable stock.
Signs of the retail sales becoming more difficult can be detected at auction now too, these 2 Euro 6 engine vehicles seen below had been entered into auction by a local main dealer.
The vehicles had clearly been prepared for a retail sale and were immaculate, with full documentation and low miles. They of course sold very well at the sale; however one has to question why the dealer did not retail rather than trade the vehicles.
This was probably down to the number of days the vehicles had been held in stock, requiring them to be returned to the trade having not sold as retail units.
This all demonstrates the sheer fragility of the used markets at the moment, at a time when they should be absolutely steaming ahead. Low supply remains across all sectors, but with a low demand now seemingly set into the markets that is leading to some stagnation. These are difficult times indeed, with many businesses in the industry struggling to keep the doors open.
And yet despite all this economic turmoil, there was an uneasy calm about the used markets at auction with, actually some good sales results for our client base.
This could of course be the trade re-stocking forecourts after an extended summer break, time will tell if that is indeed the case. For now, though we continue to manage each and every sale to a very high degree, ensuring the best prices are paid; that could mean holding stock back for a better day because, on some days there was simply no serious buying going on. We believe that an extra 7 days in the sale cycle is worth waiting for, to hit the best residuals.
Yet again the theme of damaged and non-running vehicles has come to the fore. These vehicles are now regularly making between 35 and 50% of CAP, unless it was an extremely desirable vehicle such as the cherry picker access platform seen below. Despite being a non-runner, this vehicle type always makes fortunes when offered at markets, especially on the robust Sprinter chassis.
But these exceptional vehicles are few and far between, any ‘normal’ vehicles, car or LCV with extensive damage will suffer very poor residuals in today’s markets. The lack of retail demand has dictated that the trade does not need to buy volumes of stock at the moment, thus they are able to select very carefully based on miles and condition.
GENERAL MARKET REVIEW – CARS
Before we explore the used market activities, it might be useful to consider the new car registrations this year, as we enter the next plate change to ‘72’ numbers. Overall new car registrations this time around are roughly 30% behind where they were in 2019, i.e., pre-Pandemic.
Perhaps more interestingly is that the share of the Battery Electric Cars has increased again this year, now making up 14% of the total UK car parc.
Diesel car registrations are reducing at a similar level now down to just 11%, whilst petrol cars make up the largest segment now, taking 57% of the total. The remainder is taken by Hybrids, petrol or diesel.
Some of this change can be attributed to the lack of supply for many Manufacturers, some of which are now concentrating their efforts on producing ‘environmentally friendly’ product, rather than the usual ICE variants. But clearly there is now a real change in the public and fleet buying habits, with a positive move towards electric vehicles.
Activity in the used car markets remained remarkably steady this quarter, despite all the gloom surrounding the general economic situation here in the UK. For the 2nd month in a row, demand has exceeded supply in used cars, creating some stable pricing. This is most prevalent in the younger and nearly new sector, where continued lack of new car supply is pushing most retail customers into used stock.
Similarly, Euro 6 diesel cars are selling very well lower down the age range, with early 2016 cars making very strong money.
As we have said previously, later generation battery electric cars are in strong demand as are petrol hybrid examples too. However very early generation electric cars are not such good news now, with some being sold for parts only.
With some strong activity at auction for cars, it is difficult to reconcile that with the relative lack of retail demand and the possibility of a strong recession this winter. The answer is that the retailers are making every deal work, being canny with the retail prices being charged and, in many cases now accepting much reduced margins. They must because at auction, the desirable cars are still making CAP Clean or more depending on condition, so the ability to build in large profit margins has gone. Particularly as the used car retail prices are being squeezed across the country, as dealers try to remain ahead of the competition on price to attract deals. Some extreme cases show that cars are being offered at little more than a CAP Clean price on the forecourt; that surely cannot be allowing for any decent profit margin.
GENERAL MARKET REVIEW – LCV, TRUCKS AND PLANT
As usual for the LCV markets they did retain some fairly good sales results this quarter, as businesses continue to seek out vans to replace their ageing fleet. With a now severe shortage of available new stock many are turning to used vans to provide temporary replacements for older, sometimes non-running vehicles.
The latest figures suggest that the new 72 plate has produced nearly 25% fewer LCV’s than this time last year and, a similar reduction compared to September 2019.
This reduction in new van availability seems set to continue for the foreseeable future, leading to several years going forward of a shortage of used stock, when these new vehicles become older. Assuming even the low current level of demand continues into next year, there will still be a shortage of available used stock to satisfy that demand, well into 2023 and beyond.
As with previous quarters this rush to buy used nearly new stock remains most prevalent in the more specialist vans, such as Luton’s, Dropsides, Tippers, typically vehicles that take much longer to build and register new.
All this lack of supply usually translates into strong demand and, therefore higher prices being paid at used market. However, demand remains fairly flat and, with the still-too-high Trade Guide Prices most sales today are being reported at less than 100% of CAP.
The smallest City van sector continues to see a fall in guide prices, but only by around 2%. There remains very little volume in this sector though so, most vans being offered are finding new homes.
The most popular sector remains the slightly larger CDV group of vans, with Berlingo and Partner currently outperforming other models in the sector against the Guide values.
This is largely because the Guide prices for the traditionally more expensive vans such as Caddy and Connect remain too strong and someway ahead of the Berlingo. So, pound for pound, Berlingo and Partner represent the best ‘value for money’ to both the trade and retail customers.
Medium panel vans have seen a slight reduction in demand unless they are of the high roof variety, or with any extras fitted such as roof racks which does make them more attractive to the trade.
The strongest LCV sector remains the larger panel vans and Luton’s, where pre-Christmas parcels delivery usage is driving demand.
Very much an oddity over the last year is the popularity of the ‘big LCV van’, between 3.5 and 6 tons.
The 5 ton Transit van seen above is proving very popular at the moment which, together with the Sprinter 5 tonner have even been hailed ‘Truck of the Day’ by Commercial Motor magazine! And that provides the clue as to why these, normally hard to sell vans have become popular; the haulage industry is showing a lot of interest in them, picking up delivery work for larger items.
This phenomenon can also be attributed to the Pandemic, where haulage work became scarce forcing operators to seek work elsewhere. In the smaller heavy parcels sector they have found a niche, requiring these heavier vans which can be driven by older licence holders, on a normal car licence (passing a test before 1st January 1997).
The truck markets remain very stable however one change that is beginning to make itself known is the strong desire for Euro 6 vehicles now. Throughout the Pandemic, the trade and retail customers have been content to use Euro 5 or, sometimes even older Euro 4 stock, as long as it was clean and capable of a few years work. That has now changed, with any truck likely to venture into urban areas now having to be Euro 6 as a minimum.
So, typically any box, fridge or dropsides in the weight range 4 to 18 ton would now ideally need to be Euro 6 in order to achieve the best values. Older models are now being sold for parting out, unless they are extremely low miles and clean.
Similarly, any trucks engaged on council type work would also need to qualify for Euro 6, such as RCV’s seen below. Anything older is being sold for export or parting out now, with very old RCV’s definitely being scrapped, as evidenced by prices not really differing between a 10- and 12-year-old example.
But a decent Euro 6 RCV can fetch some very strong money indeed when presented at market for sale.
Other more specialist and, typically heavier trucks can still get away with being Euro 5, as they rarely venture into inner city limits. Tractor units for example which operate between distribution hubs, or tippers, heavy dropsides with cranes, hook loaders etc. All are still selling well despite them perhaps not being Euro 6. Of course, values are different, with any with a Euro 6 engine making very strong money indeed.
The trade is trying to ‘future proof’ their purchases, now that there is more supply to choose from, which was always going to happen at some point. Covid simply slowed the process down.
Plant and equipment markets remain unaffected by any turmoil, with absolutely no let up in demand for any type of product.
Large or small, wheeled or static, any items that are produced for auctioning are sure to attract a lot of attention at sale time, especially if they have come from a well-known source with low hours and documentation.
Much of the stock being bought is still for export, particularly the larger construction equipment. The fluctuations in Sterling does not seem to have made much impact in the export drive currently, probably again due to the difficulties in obtaining any new equipment.
With an uneasy calm descending on the used markets from the middle of the quarter onwards, we can but hope this continues for the rest of the year with some decent trading being enjoyed.
All of the requisite factors remain there, very low supply, some improving retail demand and a lack of available new stock. Demand remains low, but it is hoped that as we move forward the public regain a little confidence to be able to go out and buy vehicles again, even if not for pleasure. Vans for example are often a must have purchase so that alone will continue to keep at least the LCV markets alive and ok, if not well!
ROSTRUM MANAGEMENT AND ‘PROFIT’ EARNED
It has been noted by some commentators that a deal of the stock seen at auction currently has become ‘stale’. This means that they are not fresh stock, and the trade know that. For whatever reason, the vendors have not accepted the first bid on the vehicle which, as we know is usually the best bid, because it is ‘fresh’ stock. Subsequent sales see the vehicle price reducing considerably until someone ultimately swallows the pill and agrees the sale.
This is precisely why we manage each sale of our client stock from the rostrum, virtually or physically, to prevent our stock from becoming ‘stale’ There is always a reason why something does not sell first time out, usually damage or mileage related.
Our experience tells us that the first bid is the best bid, which is why we work with the auctions to ensure that first bid is as good as it can be.
XBG FLEET REMARKETING LIMITED
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