Record new car registrations put pressure on residual values

Cap is predicting a challenging year, with volumes in the used car marketplace continuing to rise thanks to record levels of new car registrations in 2015.

The Society of Motor Manufacturers and Traders (SMMT) has reported 2.63 million new vehicles were registered in 2015, up about 6% on 2014 and the fourth consecutive year of growth.

UK fleet and business registrations boosted demand by 9.8% in 2015, to reach an all-time high of 1.4 million units, while appetite in the private sector was also robust, up 2.5%.

Derren Martin, senior editor at cap Black Book, said: “Stability in the market will rest on strong retail demand. The record levels of new registrations in 2015 were preceded by three strong years of growth, following the recession. 

“It is clear that cheap finance is a key factor in strong consumer demand, and while low interest rates help to fund these deals, strong resale values are vital to maintaining low monthly payments.

“We are predicting there will be more pressure on used prices during 2016 than there has been over the last 12 months.” 

The market has posted increases in all bar one of the past 46 months and a bumper December – the biggest ever, up 8.4% – saw 180,077 new cars registered.

Fleet and business sectors were responsible for 60% of sales in December, with 108,473 registrations.

Martin said: “The challenge for retailers, and the industry as a whole, surrounds how many of these registrations were actually as a result of natural demand.

“Fleet registrations are likely to have been heavily incentivised and pre-registrations appear to have been at unprecedented levels throughout 2015. 

“With volumes increasing, the challenge for the industry is to match used car supply with demand without distressing prices.”