Remarketing: Poll results help auctions buck usual summer trends

Dean Bowkett finds that poll results help auctions buck the usual summer trends in the wake of Brexit and snap general election. 

The used vehicle market seems to be defying the norm in almost every direction and much of it is due to Government policy or announcements. 

Normally at this time of the year we see the used car and commercial vehicle market slow down as buyers and sellers take a well-earned holiday plus, being so close to the plate change, we also generally see such a reduction in the volume of used vehicles hitting the market. 

Not only do volumes reduce but used values ease back as well, with reduced supply being met and overtaken by a reduction in demand. 

However, we haven’t seen normal seasonal trends for a couple of years thanks to indirect Government intervention. 

In 2016, the uncertainty in the run-up to the EU referendum and the initial aftermath of Brexit suppressed the strong flow and demand we typically see in June. 

This year has seen the snap general election and even more uncertainty as the landslide lead in the polls got quickly eroded resulting in anything but the “strong and stable leadership” the election was called to provide.

The upshot of this has meant that rather than seeing strong demand and prices in June and a softening going into the summer season, we have seen the exact opposite with June 2015 and 2016 seeing depressed volumes and the upswing happening in late July and into August according to BCA, Manheim and Cap HPI. 

This increased activity and relatively strong footfall is putting some healthy upward pressure on values.

All sources are indicating a reduction in the average age of the typical LCV passing through, with BCA reporting a fall in the average age of LCVs year-on-year of 3.82 months to 49.6 months and mileage dropping by 3,751 to 65,881, as you would expect with the younger age. 

Manheim also reported a similar four-month reduction in the average age of vans being sold with a similar reduction in the mileage, although it is seeing a slow rise in the average age during the first half of the year. 

Cap HPI also saw a sizeable dip in the average age of vehicles falling by two months to 57 months in July, which is a year-on-year drop from 65 months to 57 months with the mileage falling by just in excess of 6,000 miles over that same period.

Part of that pull down in average age has been due to the “increased volume of ex-rental vehicles” according to Cap HPI, although we have now got past the washout of the fleet and leasing vehicles which were extended during the economic crisis and returned during 2014 and 2015. This has also helped bring back down the average age.

Year-on-year values are up 10.4% (£622) for the period, according to BCA, while Manheim reported a rise of around 8.5%.

While some of this can be attributed to the younger average age and lower mileage of LCVs being sold, it still indicates an underlying strength in the used van market.

Manheim is particularly optimistic about 2017. Matthew Davock, head of LCV at Manheim, said: “When comparing month-on-month and year-on-year statistics, this further demonstrates we are witnessing a super-heated marketplace in what, historically, can be a challenging period.” 

He added: “The first half of 2017 has been incredible. Year-to-date we have grown our overall volume number by 14% against our 2016 position.” 

Among fleet/lease vehicles, the year-on-year average age stayed fairly consistent at a little over 39 months although typical mileage eased to just less than 60,000 miles with the average sale price of £7,176 now 36.72% of the list price, which is an improvement of 1.57 percentage points. 

Compared to the previous month, values were all but unchanged (up £2) which has been the case since October 2016.

With many SMEs, particularly the start-ups and sole traders, choosing to either outright buy or finance a used van rather than go down the PCP route for a new one (which has dominated the retail car market), the relatively low volume of good quality, lower mileage vans coming off fleet has been met with a healthy retail demand resulting in what many, including Davock, are describing as a super heating of the wholesale and retail van market.

While BCA reported July part-exchange values dropping by 1.2% on June, they remain 7% up year-on-year and most are reporting the best prices for good quality commercial stock, i.e. white vans needing minimal refurbishment. 

“While demand for larger panel vans was sometimes patchy, there was plenty of interest in any van with a good retail specification,” said BCA LCV operations director Duncan Ward, a sentiment echoed by Cap HPI which has also seen a weakening in the used values of large panel vans.

According to Cap HPI, chassis-based vehicles like tippers, dropsides and Lutons are doing better than they have done recently.

Cap has witnessed a steady downward trend in stock levels which will also add to the upward pressure on values.

This is despite the increase in new LCV sales from three-four years ago as the recovery from the financial crisis kicked in. These are now coming into the used market.

Average value figures up by more than a quarter

Staying with the newer end of the market and nearly new LCV values rose 12.3% to £15,144 in July, according to BCA, which is the highest since November 2016.

BCA also highlighted that year-on-year the average age has increased from 7.73 months to 8.8 months and the mileage increased by almost 3,000 miles, yet the average value sale figure of £15,144 is 25.7% above the same period last year. 

Part of the reason for this is that volumes remain relatively low at younger ages as manufacturers are less inclined to support the level of pre-registration activity on LCVs that is now evident in the used car market.

The recent round of new models and facelifts is also now hitting the used market which nearly always helps push up prices. 

Ward said: “The lifestyle/4x4 double cab market continues to experience price pressure, largely as a result of the increasing volumes from this sector – basic specification models are much less desirable than the higher trim models, which the second owner much prefers.

"Condition and specification remain as important as ever and sellers should be aware that it is vital to appraise and value vehicles accurately to reflect current market sentiment.” 

In contrast to BCA, Cap HPI noted the lifestyle SUVs and pickups were struggling even though “the majority of examples we saw were of a high specification and in clean condition”. 

Cap HPI believes this resulted in a number of re-entries as sellers held out for higher prices.

However, these vehicles fall between the workhorse requirements of tradesman and the statement lifecycle wants of a retail consumer. 

 

Attractive discounts and finance offers on new vehicles

This means the truth probably lies somewhere in between with retail demand for these vehicles being lured by attractive discounts and finance offers on new vehicles which is softening the used demand somewhat but persistence among sellers is holding up the used prices, at least in the short-term.

Among city vans, also known as car-derived vans (CDVs), the top five models by used sector share were Nemo, Fiesta, Fiorino and Corsavan, with two versions of the Fiesta taking second and fourth, according to Cap HPI.

Among these, only Fiesta outperformed the trade guide which is good news for Ford but puts added pressure on the other brands. 

But some brands are now paying the price for pushing too many vehicles into the market in the past couple of years.

Cap HPI highlighted that the Peugeot Partner, in particular, is failing to get to the trade guide prices due to the new van volume Peugeot put into the rental fleet two years ago, which has resulted in values dropping by around 3%.

A spokesperson for Cap HPI said: “We have also noticed an increase in the volume of electric vehicles appearing although the volumes remain small.

"While commercial vehicles weighing in excess of 3.5 tonnes also represent a tiny share of the market the strength in values seen through much of this year continued as they outperformed the trade guides again in July by around 8%.”

With new LCV sales down 3.1% year-to-July, we can expect to see mounting pressure on younger used van values due to discounting on new vans, particularly with the sudden surge in scrappage deals available. 

Ford recently announced up to £7,000 on its scrappage scheme until the end of this year on pre-Euro 5 vehicles, including the Transit van range; Volkswagen is offering up to £2,000; Peugeot up to £7,000 on vans more than seven years old; Renault up to £2,000 plus other discounts; and Toyota up to £2,000.

Meanwhile, Fiat Professional is promoting a massive ‘up to’ £13,500 scrappage ‘bonus’, although the scrappage element is just £500; the rest is discounts.