HEADLINE NEWS
The used markets remained very buoyant for much of the Spring in most sectors, despite the ongoing world issues with energy prices and the Ukraine war. It would appear that the average used buyer is putting these issues to their back burners and getting on with life, making the purchase of the used vehicle. Of course, the continuing industrial unrest in the UK with strikes and picket lines now becoming a familiar sight is going to impact on people’s ability to purchase more expensive goods and services, used vehicles being one of them. Whilst the unrest continues there is a general move to ‘hang on to what you have’ until the way forward is clearer.
Maybe because of that, the sweet spots for both used cars and LCV’s remains the cheaper end of the markets. For cars this is anything that can retail for less than £10000 and for vans the figure is £8000 + VAT. Any product that is clean and fits this price bracket is sure to sell well at auction, although not for prices that wildly exceed the CAP figures.
However the ever-changing face of politics in this country and further afield continued to dampen demand at the retail forecourts throughout this whole period.
The Government’s initiatives in an effort to alleviate household financial hardship has largely not worked, with the Bank of England continuing to increase interest rates month after month right through to August.
This is just one influencing factor, there are many others that are all contributing to a cost of living problem for some, with the result that the used car purchase remains a choice of need, rather than desire.
Vans remain subtly different, as this is almost always a need purchase and the whole market works to this method.
The new vehicle supply situation is now widely easing in all markets, with the average lead time from date of order around 8 months. That is still a long time though and nearly new used prices remain strong on the back of this, leading to fewer new models being registered.
The management chip crisis has also eased somewhat as we go through this third quarter of 2023, although the supply of these vital elements remains fragile to say the least.
Taiwan remains one of the largest producers of management chips in the world, but their continuing issue with water and power supply and the ever-present threat of invasion by China can only mean that another crisis of supply may not be far off.
But for the here and now, the used markets remain relatively stable, but certainly a degree or so harder than they were at the end of last year.
USED CARS
As Spring progressed into summer, we saw fewer cars make more than their CAP Clean pricing, regardless of condition. This is because the retail markets remain fairly tough out there, in terms of pricing.
Retail demand is definitely there with most dealers reporting a reasonable trade, requiring them to return to auction to re-stock on a regular basis. But profit margins are being squeezed much more so, than have been seen since the pre-Pandemic days. The higher cost of living is impacting most people in one way or another and so, they seek to achieve a bargain in whatever goods they are purchasing, cars being a prime example.
Thus, retailers are having to deal, often reducing their profit margins by up to 50% to secure the deal. This will undoubtedly impact at auction time as the trade try to retain a decent margin, by paying less for the cars in the first place. The trade widely believe that CAP prices remain too high on most products and have done so throughout the Pandemic and beyond; so, they are in no hurry to pay over CAP Clean for anything, unless they really have to.
But in general terms, the used markets for ICE cars remains stable.
The other side of the coin remains the BEV or Battery Electric Vehicle markets, where we have seen an almost complete lack of demand at auction throughout the early summer months. The latest auctions statistics suggests any BEV is taking on average 50 working days to sell and, even when it does very often for a lot less than the Book price. The shrewd Vendors have decided that the cars must sell, almost regardless of the CAP price as they know they have much more stock to come through this year and beyond.
Indeed, many of the larger used retail outlets currently have an outright BAN on any of their sites buying used BEV’s, concentrating instead on ICE cars.
So why the problems in this sector?
As we have said in previous months, the political push towards an emissions free world has dictated to many fleets that they must now procure BEV’s rather than ICE cars. New car registrations in this sector are soaring as lease rates (and tax regimes) favour this fuel type.
However, the whole life costing model for such cars must surely now be changing because both new and residual pricing is on the move.
Tesla’s announcements earlier in the year of “drastic new price reductions” could not have come at a worse time for the used BEV markets
For the new car markets the price reductions have now (finally) brought Tesla product in line with the luxury competition such as BMW, Audi and Mercedes and, in many cases making the Tesla product cheaper to buy. This price adjustment is undoubtedly dragging the rest of the BEV market down, including that for the used values.
With now large volumes of used BEVs sitting at auction awaiting buyers, the only way forward was to drastically reduce the CAP pricing for them, to try and stimulate demand, which happened as we went through to the summer months. This brought the BEV used pricing more in line with their ICE counterparts, which remains the purchase of choice for the used buyers, with the hope of stimulating some demand for electric cars.
Even when the pricing issue has been sorted, that still leaves the age-old problem of recharging infrastructure which, outside of Tesla remains woefully inadequate for any other marque. The used buying public know this and many are being deterred from making that purchase, even if they could afford it.
USED LCV
There is growing evidence that the LCV markets are now falling into two camps, mostly based around mileage but also of course down to damage too.
The best performers appear to be those vans with less than 100,000 miles recorded, with those that are clean at times achieving higher than the CAP Average valuation. Almost without exception though those vans with more than 100,000 miles recorded are not making Book, regardless of condition.
The reluctance of the trade to buy high mileage stock is not new and is a perennial issue, mostly driven by putting further finance on the vans to sell them on. Very few finance companies will consider vans with more than 100,000 miles recorded for any further finance, therefore such vans have to sell for ‘cash’. In these harder economic times that is becoming increasingly harder to achieve, hence why many vans in the higher mileage sector are not making Book prices.
The other major change this year is the used LCV supply which, until the start of 2023 had been very low, creating artificially high prices.
That has changed significantly with many auction sites reporting that they are currently full up with stock. Whether this is as a result of new vehicle supply issues easing releasing older stock from Fleets is too early to tell. If this level of supply continues for very long prices will fall back and probably significantly. As the trade have more choice, they will choose to leave behind older, higher mileage and damaged stock. Time will tell how this pans out but, as of today the LCV markets remain steady with plenty of good trading going on but there are early signs of it tightening up evident.
Nearly new Euro 6 LCVs remain the most popular at market, as many businesses are being forced to operate newer diesels in towns and cities across the country.
A real ‘sweet spot’ this month is the first of the Euro 6 engine LCVs, so vehicles registered from 2017 onwards. As long as they are good order and with less than 100,000 miles recorded they are nearly always going to make strong money.
Electric vans are beginning to suffer like the cars, with some auctions reporting no competitive bidding on the stock. Pricing is an issue here although not quite so sensitive as the cars. But early generation electric vans are now largely not wanted anywhere having been superceeded by better, longer range variants. As a result most early stock will probably sell for parts or very local use only.
4×4 pickups continue to sell well at market but rarely will they exceed Book prices. Examples like this Ranger double cab in Limited trim will sell as long as the Vendor is sensible with prices. Having a truckman top would help matters a great deal.
With winter on the way, we do expect 4×4 sales and prices to stabilize a bit going forward, although we cannot see any price rises in this sector this year.
USED TRUCK
The used truck sector has remained in the doldrums for much of this year so far, with ever more stock arriving at sale sites. The choice is now considerable, and the trade know it, subsequently prices have fallen significantly in Book consistently this year apart from the more specialist vehicles.
Tractor units continue to struggle to reach Book prices, especially in the 6×2 sector. Higher power output helps, but not enough to save the pricing.
These direct from a Utility low mileage DAF 6×2 510 Tractor units sold earlier in the summer at South Western vehicle auctions in Poole.
Being Euro 6 and direct from a Utility with low mileage certainly created some competitive bidding and they all sold to new homes. But even then, they did not make the Book values, although the Vendor was happy that they had sold.
The trade is of course a canny bunch and will only buy for ‘stock’ if they think the prices they pay are at rock bottom, taking any risk out of stocking vehicles.
Some sectors of the used truck world remained unaffected by price pressures, notably because the volume is far less and, in some cases quite rare to see. This very clean Euro 6 18-ton Tipper with a Crane sold at Manheim’s Bruntingthorpe sale very easily indeed, with dozens of buyers wanting the truck. The resultant price was around £14,000 over the Book value and even some way ahead of the pre-sale estimate.
Any beaver tail truck also fares extremely well in the markets today, almost regardless of age. If they are not suitable for European markets (because they are Euro 4 or older) then export farther afield beckons.
Larger 26 – 32-ton Tippers are starting to struggle with volume, as are Hook loaders, with several examples available this month. They are selling but it is noticeable that the trade just stop bidding past a certain point, typically short of the CAP Book pricing.
Overall, trucks are selling, but they do need realistic pricing and management at the sale.
The Trailer markets have seen mixed fortunes so far this year with some strong trading earlier on. However demand has fallen back by late summer, with more volume coming to market giving more choice to the buyers, subsequently prices were down unless the trailer was really special. Like the trucks, as long as pricing remains sensible, they will sell though.
PLANT SALES
Again, there was very little change in this sector all year, with most plant and equipment selling extremely well!!
The export markets in particular are very strong at the moment, with the slight caveat that shipping costs are soaring, so this could eventually filter down to the used asset pricing.
Like the other sectors of the used markets there is plenty of volume of plant and equipment about, as larger organisations resume their replacement programs as new equipment becomes more widely available. Dumpers in particular are plentiful, as can be seen above at a Brightwell’s sale.
However, they all sold and for strong money, helped by a healthy appetite from the exporters – thus, any UK buyers have to pay the money to own them.
THE NEXT FEW MONTHS………
With 3 separate Bank Holiday’s in May, this produced a real lull in trading, akin to Easter and Christmas, bringing a temporary halt to proceedings in the used markets. Trading did not really return to normal after May, with June and July proving quite tough. August holiday period acted like most others, bringing any real trading to a halt.
We are therefore looking to a much better trading period in the last quarter of 2023, when retail demand will hopefully pickup, if not to ‘busy’ levels.
The current economic hardships facing most families will deprive them of seeking a replacement car unless through necessity, so this sector will continue to be price lead. LCV buyers will return in September and should provide some better trading, with pricing remaining stable. The truck markets are already showing signs of improvement for any Euro 6 product, anything older in the normal specifications are now selling for breaking, or export if suitable.
Taking a global view of the used markets there are signs of recovery. New vehicle supply remains woefully short of pre Pandemic levels, especially in the ICE sector. At some point, when retail demand does return to near normal levels, used vehicles will again see some strong prices and even Book increases again. However that may not be in 2023………..!
XBG FLEET REMARKETING LIMITED
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