Observations, Tim Naylor, BCA

The headline average monthly used car value in August improved by 1.8% to £7,037, with fleet and lease values reaching record levels and year-on-year values up 14.2% as good-quality stock remains in short supply and demand from professional buyers remains strong.

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Average mileage is down by around 3,000 miles compared to last year and cars are one month younger on average when sold in 2013. Average performance against CAP Clean is 0.7% up, year-on-year.

Fleet and lease values hit a new record value of £8,898 and remain significantly ahead year-on-year. Dealer part-exchange values fell for the third consecutive month, but also recorded a substantial year-on-year uplift. Nearly new values rose sharply largely as a result of a change in model mix.

Volumes will rise from mid-September onwards and this traditionally exerts pressure on average values and conversion rates. While Condition 1 and 2 cars will continue to attract buyer attention and achieve strong prices, the poorer presented vehicles might struggle. If market conditions tighten, these vehicles will need to be competitively priced to sell. We expect good volumes of business in Q4 if demand stays at the level we have seen throughout 2013, although stock availability will remain critical.

Economic confidence is the key factor, longer term. As the economy improves retail buyers may consider changing their current vehicle. There will always be activity in the used car market caused by changes in lifestyle but many families continue to struggle with rising costs while wages are falling in real terms.

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