Muted demand prevents used car values from rising

Low volume of available stock in the used car market is comparable with the first half of 2009, but muted demand is preventing a repeat of that year’s rise in values, according to the September edition of Black Book.

For disposers the shortage of cars in the marketplace is good news, preventing a 2008-style meltdown in values, but for dealers it means a constant headache finding suitable stock for retail similar to that faced in early 2009.

But the big difference between then and now, according to the Black Book market commentary, is that demand is not sufficiently high to drive values up. Nor is it strong enough to tempt trade buyers to take on significant reconditioning work.

Black Book notes: “The fact that buyers do not want to acquire poor condition vehicles on which to spend time and money is a strong indication that they are cautious over medium term prospects.”

Better news for market fluidity has been the decision by some larger disposers, who were previously reluctant to sell vehicles for lower than initial reserves, to agree to sell first time around. This is seen as a positive move, helping to keep the market moving when it would otherwise see a build-up of unwanted stock.

It reports: “Late plate stock is where the only significant volume lies and this is another factor preventing a general rise in trade values. This is a blessing for some because retail sales of these cars are generating much-needed part-exchanges and have therefore led directly to real improvement for some dealers in terms of retail business.”

Over the coming weeks Black Book anticipates a potential shift in the “uneasy balance” between supply and demand.

It says: “This month is certain to bring substantial pre-registering as order books for many franchise dealers are woefully behind targets. September will also see franchise dealers focus away from used car business and back onto new while independent dealers will be waiting for this to deliver more part-exchange stock.

“Looking toward the end of the year the most significant anticipated change will be in volume and this may alter the uneasy balance that has characterised the last few months. This will not come from fleet/contract hire disposers – who are anticipating low volumes of returns – but from several manufacturers who will be putting a lot of cars into the market.”