VRA reports on latest remarketing trends in new marketplace report
The new report looks at a number of the factors which drive supply and demand across the entire industry, taking input directly from its 50 large corporate members who between them handle more than 1.5 million used vehicles per annum.
Designed to act as a market commentary rather than a detailed report, "Remarketing Update Monthly" takes a snapshot look at the prevailing dynamics and the likely short term outlook for supply and demand.
For March, the report looked at stock shortages and found that used car supply continues to struggle to keep up with demand. Within the fleet sector, increased delivery delays from manufacturers are making the used car supply situation worse, as leasing companies see fewer cars coming back for remarketing. Many customers have been waiting for 6-9 months depending on the brand; with customers being forced to extend contracts until their new cars arrive.
A byproduct of these increased contract extensions is a rise in both the incidence of damage on returning vehicles plus an increase in the average value of damage and thus recharges. The VRA says that this trend is set to continue for some time if companies continue to increase replacement cycles to cater for longer delivery periods.
Turning to values, prices in March rose in the first half and levelled off in the last two weeks, resulting in a small overall rise for the month but less than would be expected at this time of year. Auction conversion rates very much reflected this trend, falling by as much as 5% in the latter half of the month compared with the beginning.
The VRA said that we may be seeing the early signs of shifting behaviour, driven by the slow economic recovery, with values of most small and medium vehicles remaining fairly strong, whist prices of compact executive and larger executive models came under pressure. Used car buyers seem now to be seriously considering whether 3.0 litre versions of the same model are really that much more attractive that the 2.0 to 2.5 litre versions. Some high-end value 4x4s, including Range Rovers, also saw prices fall in March with later models coming off by as much as £1,000-£1,500.
Particularly noticeable was a weakening appetite for very high-mileage cars – over 100K miles – and unless price adjustments are made to reflect these levels of usage, many will struggle to find new homes over the coming months. This will be even further exacerbated where disproportionate damage is present.
With regards to the commercial vehicles market, the VRA said that used vans continue to be very strong, with high demand across all stock categories and prices staying strong. Because of some national business failures there is a healthy supply of used vans coming into the market over the next few months but, once this dries up later in the year, supply will be more restricted and predicted to force up prices to an all time high.
Looking ahead, April is already being viewed as a potential challenging month for new and used car sales and this will be further compounded by the four public holidays and distractions of the Easter school break and a Royal wedding, falling at the end of the month.
The VRA added: 'We’ll just have to wait and see how much of an issue this becomes for the used vehicle industry, but the signs on the high street generally suggest that retailers are not confident and have already begun heavy discounting in advance of the disruption.'