WLTP brings highs and lows for used car sector
Continued WLTP impacts on the new car market are likely to keep used car demand and prices high until March 2019 but could affect desirability and values thereafter.
That’s the view of a number of remarketing experts as they highlight how the shift to the new testing regime had seen some carmakers struggle to source new vehicles, impacting fleet and overall new car registrations and in turn affecting the used car market.
According to Jato figures, more than a third (37%) of carmakers’ model ranges were not WLTP-homologated at the start of November, down from almost half (43%) at the start of October but still set to bring further impacts to new car registrations, which were down 2.9% in October and 20.5% in September.
Such a shortage of new cars has led to anecdotes of franchise dealers turning to used cars to fill forecourts while fleet buyers have been extending leasing contracts – due also to continued uncertainty over future company car tax and VED rates, with last month’s Budget failing to shed any light as the Government shelved any changes till the spring.
According to Aston Barclay, such current high demand for used cars from dealers combined with the reduced volumes coming into the market from the fleet/PCP/PCH sectors is bringing benefits for the used car sector that could continue till the spring. It added that the changes have seen stocking days of late and low and ex-fleet used cars reduce by 4.0 days and 1.6 days respectively during September and October, while prices have increased by £287 and £447 year-on-year.
But looking ahead, Adesa Remarketing has warned how current delays in fleet disposals could bring a downside to the used car sector in the longer term, due to the ramifications of older and higher-mileage vehicles being defleeted in 2019 as fleets return to replacing vehicles once they have more information on how WLTP will be used to calculate BiK and VED rates.
Jonathan Holland, managing director of Adesa Remarketing, said: “Fleets are faced with the prospect of being unable to make informed decisions on sourcing new vehicles until the Government concludes its review in the spring.
“This means many businesses who had extended vehicle life cycles, as a result of the introduction of WLTP in September, will look to extend them even further.
“Next year we can expect to see an influx of defleeted cars outside the traditional three-years/60,000 miles profile entering the wholesale sector and that could have an impact on desirability and values.”
Holland said the challenge facing the sector going forwards would be to remarket these de-fleeted cars as efficiently as possible to reduce the impact of book drops and achieve the best possible values for fleet customers.
“With older stock the need for transparent vehicle descriptions is even greater than usual, as well as the ability to remarket the cars as soon as they become available through specialist upstream remarketing channels.
“Dealers across the country are waiting to replenish their forecourt stock with de-fleets, so accurate descriptions and speed to market will ensure better results through sales proceeds and decreased days to sale,” added Holland.