Remarketing firms are at odds over whether manufacturers finance offers are attracting customers away from the second-hand market or contributing to steady used car sales figures.
Roger Woodward, managing director of CD Auction Group (CDA), has said new sales are taking custom away from second-hand vehicles and is affecting the monthly values, while the Vehicle Remarketing Association (VRA) believes self-registered ‘late-plate’ cars will continue to supply stock to the used market and Manheim Remarketing has reported brands’ deals on new cars will have to do more to interrupt the trend for rising part exchange values.
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"Franchised dealers are focused on new and have reported a good first couple of weekends of March: the very attractive deals are taking customers away from nearly-new and late-plate cars," said Woodward. "We expect that may have an effect on wholesale values towards the end of the month."
The VRA likewise expects the upturn in new registrations seen in 2012 to continue into 2013, albeit with a high proportion of self-registrations. Both Vertu Motors and CAP have warned such practice may distort figures for the UK car parc but the VRA believes late-plate cars will continue to provide ‘used’ stock for dealers in a time of short supply.
The VRA has, however, repeated the argument made by CAP and Duncan Aldred, chairman of Vauxhall, that undersold international stock may find its way to the UK through manufacturers’ "aggressive" discounts on new cars. In turn, says the VRA, such a relative lowered cost of new vehicles will put pressure on three- to four-year-old cars to come down in price.
Part ex
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By GlobalDataHowever, Darren Wiseman, valuations service manager at Manheim, has said consumers are opting for used cars over new, as shown by high average part exchange values.
Part exchange prices are at an "all-time high" of £2,938, up 25.13% year-on-year and 3.96% compared to January’s figure, despite the average car sold through part exchange now having 720 more miles on the clock than the previous month, according to Manheim Remarketing’s Market Analysis for February 2013.
The average part exchange value is now 18% of the car’s original retail price, up from 15% in February 2012.
"This trend is set to continue for the foreseeable future unless manufacturers elect to switch to more value-added marketing activities or very competitive finance options," added Wiseman.
Ex-fleet
Although the VRA has reported regional variations in ex-fleet values over the first months of 2013, overall demand is greater than the supply, leading to a premium on price and quality of stock. The Association said a depression of prices would be seen by April, accelerated by the March plate change which would see higher volumes of ex-fleet hitting the market at the end of the month.
"Supply in the mainstream ex-fleet market remains tight and there is still a shortage of the right type of stock," agreed Woodward. "Again, we would expect that to ease towards the end of the month as more part-exchanges and de-fleet vehicles become available. This is a seasonal, short term effect."
The VRA also noted average car rental company replacement cycles have extended to 18-24 months, meaning cars coming out at the end of such cycles are looking good value to consumers and trade, particularly as cars in this age and mileage range were a popular addition to the mix on a used car forecourt. However, the VRA added there were signs already of rental companies returning to shorter replacement cycles.
Overall
Folllowing statistics last week from British Car Auctions showing the average price of a used car in January was 13% above the price a year before, and a record year of auction values in 2012, Manheim, CDA and the VRA all predicted difficulties and high prices coming from a shortage of stock.
Manheim’s Wiseman said strong prices were "driven by a shortage of quality retail profile stock", which would continue despite "easing" during March.
The VRA said supply problems meant some forecourts were looking at older and / or higher-mileage cars, or reducing their stocks, down by 15% in some present cases. However, the situation could promote greater market efficiency, reflected in price stability.
Likewise, Woodward said car purchasers "remain choosey and forecourt demand for used is reportedly patchy. The right car pays good money but others may struggle." Therefore, CDA expected "the market to remain subdued for the first half of the year with some easing of values as supply becomes more readily available."
richard.brown@timetric.com
