Manheim says future for used cars is bright
In its report, Manheim feels that the effects of the recession on the new car market may still be felt by 2014 and is forecasting a drop of 2.5 million vehicle registrations over the seven-year period beginning in 2008. However, it is more bullish about the road to recovery for the used car market, which in its view will be reduced by around 3.25 million vehicles over the seven-year period to 2014. Given that there are in excess of 6.5 million used car transactions each year in the UK, this is a significantly better position than the new car market.
Rob Barr, group communication director, said: 'We should remember that there are over 31 million vehicles already in the UK, the turnover of which determines the number of used car transactions each year. The shortage of used cars coming back into the wholesale market in three to four years will be around 300,000 to 400,000 per annum and is still only equivalent to circa 1.5% of the total UK car parc. Therefore a very small increase in the stock turn of the car parc will increase overall transactions and more than compensate for this shortfall. There is a "but" though: the availability of the younger vehicles coming back into the wholesale market over the next few years will be reduced.'
But Mr Barr added that Manheim believes the current vehicle scrappage scheme will not materially affect the trading dynamics.
He said: 'The outlook for used vehicle values, across most vehicle segments, but in particular the more economical and environmentally efficient models, should also be favourable with considerably more stability than we’ve seen in the last two years.'
Manheim also points to a number of other supporting factors which lie behind its optimistic forecast for used cars. These include the value proposition of used cars, which continues to highlight the relative good value of used cars, further emphasised by recent new car price increases and an increase in credit availability as the economy recovers, which will release more potential buyers back into the market.