Price pressure starts to show in used car market

Sellers are predicting a ‘rocky road’ ahead for the used car market thanks to the combined effect of seasonal trends, a fragile economy and the aftermath of the General Election.

BCA is already reporting evidence of price fatigue having witnessed values falling week-by-week in April as more vehicles entered the market.

Pressure has been brought to bear after March recorded the highest number of new car registrations for two years, resulting in an incremental number of vehicles entering the used car market from corporate defleets and dealer part-exchanges.

“In many ways, normal service has been resumed following the unusual patterns seen last year when the market just kept rising until the autumn,” says BCA’s Tony Gannon.

“This year is likely to follow the pattern of previous typical years, with softer demand through the summer

“We do not expect anything like the meltdown of 2008, but the coming months will not be as easy as those enjoyed in the first quarter.

“History tells us that prices come under pressure at this time of year and there are some signs that this is already happening.

“A still fragile economy coupled with the aftermath of the General Election will not help matters, so do not be surprised if there is some pressure on used vehicle values in the weeks and months to come.”

In the fleet sector, the average selling price fell by 1.5% (£101) in April, having risen by 5% in March and fallen by 2.8% in February, says Manheim.

Meanwhile, BCA actually reported a rise in average fleet values for the fourth month running, with 3.6% (£278) added to the average in April.

Values increased from £7,593 to £7,871, although performance against CAP Clean fell for the first time since November from 99.1% to 96.9%.

“The traditional seasonal trends affecting average wholesale values which were missing last year have returned in 2010,” says Mike Pilkington, managing director at Manheim Remarketing. “

Although the General Election may have impacted on levels of demand in April there is now more stock available in the market so we would expect values to soften again in May.”

Overall, average values fell by 2.3% (£172) to £7,281 in April after three consecutive monthly rises which had seen values increase by 8% , according to Manheim, while BCA revealed an increase of 1.4% (£80) to £5,871.

Barry Watts, centre manager at Aston Barclay (Westbury) has also recognised the seasonal patterns returning to the market.

“However, this year has the added impact of an election which is going to cause some disruption to an already volatile time of year,” says Watts.

“If conversion rates continue at 50% or so, volumes of used vehicles available in the market place will increase and when the book does adjust for June and with the World Cup just around the corner we could be in for a rocky ride.”

Online, Carsite says that after the Easter break it began to notice a drop off in website traffic and sales slowed from their previous highs in February and March.

“Towards the end of the month website activity had picked up a little but was still at the lowest level we’ve seen so far this year,” says Alistair Jeff, sales director at Carsite.

Fleet average values by sector

Looking at fleet product by sector, BCA’s reported rise in value was seen in volume fleet product which rose from £5,712 to £5,835 and premium fleet stock, which improved by £379 to £11,396, an increase of 3.4%.Budget fleet cars remained virtually static at £4,187 following a big rise of 18.6% in March, according to BCA.

Looking at the average selling price by segment, Manheim reports a fall in five, most notably for supermini, which was down by £249 or 6.1%, small hatchback down by 6.3% and mini-MPV models falling by 6.3%.

The average age of supermini models rose eight months to 47 months and average mileage by 4,166 miles to 32,006 miles.

Similarly, the average age of small hatchback models rose three months to 47 months and average mileage by 2,511 miles to 37,383 miles.

Meanwhile, the average age of mini-MPV models rose by one month to 46 months, although average mileage fell by 2,166 miles to 46,270 miles.

The average selling price rose for all other segments, most notably for coupé models, which was up by £1,583 or 15.2%, compact executive up by 7.1%, executive by 6.9% and MPV models by 6.5%.