VRA reports healthy demand for used vehicles

The used vehicle market has remained quite strong through October into November with increasing stock levels providing a good mix for what continues to be fairly healthy demand, the Vehicle Remarketing Association (VRA) reports.

It suggests resulting prices across most sources of supply have also been very respectable and values are expected to remain quite stable, falling marginally to the year end.

However, as reported in last month’s update, a note of caution should be applied to vehicles with excess damage, as buyers are tending to shy away from anything where substantial refurbishment is required. This applies across most segments and is an indication of an ongoing element of nervousness from dealers about length in stock, reflecting the importance of quick turn around on the forecourts.

Hence, vehicles with sensible mileages requiring minimal work, or better still in ‘ready to retail’ condition, are attracting plenty of interest. Those over-worked vehicles where mileages have been allowed to creep up above normal levels are also struggling, unless offered very realistically or below market value, says the VRA.

Feedback from VRA members close to the retail market suggests the current basket of quite aggressive new car offers may be diluting some interest away from used cars. However, there is no doubt that franchised dealers have increasingly turned their attention to used vehicle retailing to support profitability in the last few recession-driven years.

In many cases it has become the most profitable income stream and has driven plenty of demand into the wholesale area as new car dealers compete with the independent used car specialists over stock which has traditionally been the domain of the latter. That said, there are currently some marked regional variances in retail activity.

Those models feeling a cold draught, as autumn bites, include convertibles, most sports cars and a number of larger engine executives models. In this latter case the more fuel and tax efficient counterparts from the same ranges are looking increasingly more attractive and this is a trend which is expected to continue. Conversely, the seasonal popularity of 4x4s is back again with demand and corresponding values on the up once more.

With diesel now taking 50% of the overall new car market the demand for used diesel models is also strong and there is now a clear gap now between diesel and petrol derivatives in the mid to large segments, favouring diesel. Nevertheless, petrol models in the smaller segments are still very strong and often more popular than diesel.

The van market continues be short on used stock. All light commercials which arose through the numerous corporate casualties seen throughout the year have pretty much now been swallowed up. Consequently we’re back into a scenario where demand is still not being met by supply and this applies across most age segments.

As for the outlook for 2012, this is still difficult to predict. A sustained period of economic calm will need to have passed before markets and consumer confidence returns to levels where more accurate forecasting is realistically possible. However, VRA members are expecting the early part of the New Year to be fairly strong, as expectant dealers stock up forecourts and ramp up their used vehicle marketing activity.

Supply of both cars and light commercials is however still expected to be fairly light and this should fuel some positive sentiment in the used market. You only have to look back at the falling new vehicle registrations since 2008 - down by at least 400,000 units per year on the years before recession – to know that the shortage of one to four year old used vehicles will continue for some time to come.

Also as always, a watchful eye should be kept on the weather where the meteorologists are currently predicting a very cold winter. Severe frosts, ice and snow have always been the motor trade’s worst enemy.