What lies ahead…
The RV panel:
DM – Derren Martin, Black Book Live senior editor, CAP
RW – Roger Woodward, managing director, CD Auction Group
DS – Dylan Setterfield, Gold Book senior forecasting editor, CAP
DW – Daren Wiseman, valuation services manager, Manheim
DB – Dean Bowkett, technical director and chief editor, EurotaxGlass’s
Just as criminals are using technology to carry out ever more sophisticated crimes, the police are adopting equally high-tech solutions in a bid to beat them at their own game.
And perhaps the most visible form of police technology is contained in the humble panda car, which is now regarded as a mobile police station for forces up and down the country.
But it is Hertfordshire Police, in conjunction with a number of technology suppliers and blue-light vehicle market leader Vauxhall, which is pushing the boundaries of mobile technology.
It is currently trialling 10 specially modified Astras which have been built at the Vauxhall Special Vehicles operation at Millbrook (see box out). These cars incorporate a Panasonic Toughpad mobile tablet which can be docked into the vehicle and then operated via a touchscreen monitor located on the centre console.
The trial cars also come with a 4G mobile broadband router located in the boot. The result is a police car with its own wireless hotspot (of up to around 30 metres from the car) which also has a direct link through the tablet device to various back office functions such as the police headquarters server, the Police National Computer and the Automatic Number Plate Recognition system database.
This mobile solution also allows for numerous time-saving applications. For instance, the police headquarters can send the location of a crime to the car’s built-in satellite navigation so officers can be directed to the scene as quickly as possible. The integrated tablet also allows officers to reduce paperwork by issuing online warrants and filing crime reports on the computer, as well as using the built-in camera to take photographs or video from a crime scene.
The initial response from frontline officers to the new tablet and mobile solution in the car has been so positive that Hertfordshire has already ordered 50 of its current fleet to be retro-fitted with the technology. In total it will equip 86 vehicles with the mobile solution technology.
What is the used car supply
going to be like this year?
Derren Martin, Black Book Live senior editor: ‘Although there was an increase towards the end of 2013 in self registrations and forced registrations, these should be manageable from an overall market perspective. Indeed, some dealers have welcomed the supply of those vehicles due to recent shortages of quality used car stock. Manufacturers are now much more aware of the need to dispose of these vehicles responsibly and we do not expect any shocks to the market as a result.
Roger Woodward, managing director of CD Auction Group: ‘Last year was characterised by a shortage of three to four year old, ex-fleet vehicles which form the core of the used car retail business. I don't see that changing in 2014 which means the fundamental of relatively high, stable wholesale auction values is unlikely to change.
‘There are two factors at work here. The first is simple maths – three years ago new fleet registrations were flat (up 1% over the prior year) and retail registrations were down 18%. So, used cars are still going to be in short supply. Second, we hear companies are still reluctant to invest in new vehicles and release stock, despite the improving economic conditions.
‘Against this, the manufacturers are still pushing new product into the UK market and franchised dealers I have spoken to say large incentives remain in place, at least for the first quarter and maybe even beyond.
Dylan Setterfield, Gold Book Senior Forecasting Editor, CAP: Over the year, we expect to see increased used car supply due to the return at contract end of increased fleet registrations in 2010 and 2011 of +10.3% and +4.6%. In the context of historic fleet volumes, however, we see this increased supply only as a return to expected levels of business.
‘The overall impact is a return to normal aging patterns following the shortages which resulted in such resilience in used car prices through 2012/13.’
Daren Wiseman, valuation services manager, Manheim: ‘There has been some really positive news coming out of the UK automotive sector of late, with new vehicle registrations reaching their highest peak since pre-recession and UK car production at a six-year high. However, it is likely that many of these vehicles won’t enter the used market for another 12 to 18 months. As a result, 2014 is likely to continue in much the same vein as 2013 when it comes to supply.’
Dean Bowkett, Technical Director and Chief Editor, EurotaxGlass’s: ‘The supply of 1-5 year old cars bottomed out last year for the UK, 19.4% lower than before the crisis and it is now starting to rise. But the number of 2-4 year old vehicles available this year will still be 15% lower than in 2007, that is 1.1 million less cars which would typically go through dealer’s hands.’
What wider economic conditions do you see affecting the value of used cars?
DS: ‘Although some commentators see the UK economy as a star performer this year, relative to the rest of Europe, we remain cautious and would describe this year’s growth as modest, with no significant concerns regarding the underlying metrics. Our research has shown that the impact of macroeconomic variables is different by vehicle sector and we have differentiated our forecasts accordingly, with all macroeconomic data underpinning our forecasts for the next 5 years available to Gold Book iQ subscribers.
‘We commented last year on the likely impact of economic recovery in some Western European markets and still believe these will become more attractive to manufacturers than the heavily discounted UK market. Indeed, we are already hearing reports of increased UK lead times for certain desirable vehicles.’
DW: ‘Looking at the bigger economic picture, house prices are on the rise, with the average asking price in England and Wales for January 2014 at £243,861, compared with £229,429 in January 2013 (source: Rightmove). When property prices are positive, it tends to follow that the general consumer and business confidence is also on the rise. And, as people feel more secure with their spending, car purchases – new and used – come back on the agenda. For the fleet sector, this means that there is demand out there for de-fleeted stock in the wider market.’
DB: ‘Whilst the UK spent 2013 racing ahead of Europe we think the rate of new car sales growth will slow this year and may optimistically just reach 2.3m – an increase of just over 1.5%, although we are forecasting a slightly more conservative 1.3% at the moment. The reason for this is because we think there is a danger that the UK market is starting to overheat and OEMs will also look at the opportunities to encourage sales back in the depressed Eurozone which may mean having to spend slightly less money, with the strengthened pound making sterling incentives more expensive.’
What particular sectors and/or models are going to do well this year?
DB: ‘SUVs will continue to dominate this year as will low CO2 emission vehicles, particularly the latter in the fleet segment. The ever diversifying range of the premium brands will continue to eat into the volume brands’ market share although we expect the resurgent Jaguar Land Rover and Volvo to make further headway in 2014 with their strong model ranges, relatively low discounting strategy and a loyal and growing following. Hybrids will become increasingly more common but I still struggle to see a huge uptake in pure EVs, at least this year.’
DM: There is clearly significant variation by model, but in general there will be enhanced performance for those models where used volume is expected to decrease, reversing the overall market trend. This may be due to lower three to four year old volumes resulting from reduced fleet registrations such as Toyota Avensis and Honda Accord, or a return to more usual volume patterns of nearly new vehicles for models such as Ford S-Max.’
DS: ‘In CAP Gold Book, Year Over Year percentage (YOY%) market deflation is segmented by sector and fuel type and then adjusted for individual vehicle performance. In general, the best performers will tend to be smaller cars, with petrol and diesel broadly similar, but petrol is expected to perform better than diesel in Lower Medium and Executive cars and worse than diesel in the Upper Medium, Supermini and City Car sectors. The difference observed in the smaller car sectors is attributed to the relative strength of the new generation of low emitting diesel engines.’
What particular sectors and/or
models are likely to do worse?
DM: ‘We expect to see larger reductions for those models where we have been seeing increased levels of self or forced registrations, or increased levels of manufacturer discounting.
‘Some manufacturers are increasing volumes in the daily rental sector as they seize the opportunity to capitalise on the volume gap left by some manufacturers reducing allocations to this area of business and they continue to focus on the battle for market share above profitability. This will have an inevitable impact on nearly new values from the second quarter onwards for certain models.’
DS: ‘Used electric vehicles are expected to remain under price pressure following the first fleet returns and an increased level of demonstrators needing to be disposed of. Some vendors will find they have to “bite the bullet”.
‘At the more expensive end of the market, prices for Large Executive, Luxury Executive, Sports and Supercars will reduce by more than the overall market from their current positions, which are viewed as being unsustainable, particularly as volumes are likely to increase.’
DB: ‘In the UK fleet sales (excluding daily rental) increased in real terms in 2013 however private sales grew even stronger resulting in fleet sales dropping 1.2pp to 32.8% of total sales for 2013. For the year ahead UK fleet sales are likely to remain flat to minimal growth with private sales continuing to be the main growth driver, thanks to a growing grey company car fleet (company car drivers taking a cash allowance instead to fund their own car) who are taking advantage of the strong discounts and low funding rates on offer.’
Are there any other mitigating factors that might affect RVs positively or negatively?
DS: ‘Although some have disputed the impact of seasonality, there is clear evidence that the seasonality of leasing conversion rates at auction and the performance against CAP Clean is remarkably consistent. This should not be a surprise due to the natural shifts in supply and demand which have always been experienced throughout the calendar year in the UK used market.’
DM: ‘Much has been made of the growth of PCP deals in the UK, but this increase is not directly equivalent to an increase in used car supply. The first of these are likely to begin filtering into the used market from this summer onwards and these vehicles represent a steady future supply of quality used cars for dealers. Those best placed to sell drivers up into their next vehicle will be the ones who benefit the most, but we do not expect the market to be suddenly deluged with ex-PCP cars as deals expire.
‘Seasonality is also a factor when it comes to the three or four year fleet cycle. For example, the new vehicles which were in fashion in 2011 are now making their way into the used market in large numbers. This is not a problem for fleets, so long as the approach to remarketing takes into account market supply and demand trends, ultimately selecting the correct disposal channels, geographic distribution and the timing of stock release to maximise residual values.’
DB: ‘The biggest factor not just for 2014 but beyond as well is the whole area of Total Cost of Ownership for both the corporate fleet managers and the company car drivers. The problem at the moment is whilst there are very real incentives for fleets to buy these low CO2 emission vehicles the financial benefits in the used car market are far more limited. This does raise the risk of a potential imbalance between the demands of a new and a used car buyer.’
What other advice would you give to fleets about their 2014 defleeting strategy?
RW: ‘Cost of ownership is becoming increasingly important in the used retail market, so it's obvious that favourites such as superminis will do well while gas guzzlers will struggle, except with international buyers. Fleet managers need to think about spec and colour at the acquisition stage and not be tempted by low-rent, fleet specials – unless you're in daily rental.’
RW: ‘Provided the offers are on the right vehicles, order now, take advantage of the incentives and then remarket your used fleet into a strong wholesale market to maximise residual value.
‘Certainly don't be thinking about extending contracts or running vehicles beyond their typical lifespan. Values may be high but retail demand is patchy and professional buyers are only bidding on good quality, quick-to-retail stock. Poor quality, over age cars are being left on the lot.’
DS: ‘It’s an old maxim, but the first opportunity for sale is usually the best. Depreciation is a fact of life and stock needs to be turned effectively by both fleets and dealers.’
DM: ‘We would advise fleets to monitor the used market closely, ideally via real-time valuations such as Black Book Live, and adjust their reserves accordingly. Monthly pricing is no longer agile enough in a faster-paced environment which changes from day to day. Sellers should also be realistic in their expectations. As always, when it comes to condition, fleets should not expect to achieve CAP Clean for an average condition car.’
DW: ‘It is important that fleets continue to take a sophisticated approach to their vehicle selection at the start of the contract and the choice of remarketing channel at its end. There are still a few vehicles in niche colour combinations which arrive in the auction halls from a user chooser policy; however, most fleets are now far more prescriptive with their vehicle mix, ensuring that the right colours and specification to maximise residual values are selected from the outset.’
DW: ‘It is then essential to ensure that de-fleeted stock is prepared effectively for remarketing. Again, most fleets are doing a good job to ensure that the vehicle is well-presented and with all of the correct paperwork; however, we do see the occasional vehicle which does not have a complete service history or is missing a key. Inevitably, these vehicles perform less well at auction.
‘Looking at the specifics, the average price of a de-fleeted car at auction increased by £178 during 2013, reflective of a fall in average mileage of 614 to 59,962 while the average age remained at 52 months. The past 12 months have been fairly good for leasing companies looking to gain best value for their de-fleet stock. It’s largely been a seller’s market and residual values have been strong. While all the indicators point to another good year for vendors in 2014, the leasing companies that have an in-depth knowledge of the market, along with a flexible supply chain, will continue to achieve the best value for vehicles.’
DB: ‘2014 is going to be far more stable than the last five years so we should see far less sign of values shooting up just to drop away a few months later; however we do think the general trend for the year is down. That said if you get products to the right standard and they are in the right segments, e.g. SUVs, premium brands and even the volume brands at the right price should do reasonably well.’