The used van market is facing a potential black hole of at least 375,000 vehicles due to the fourth consecutive year of low new light commercial vehicle (LCV) volumes.

The shortfall of first-time used LCVs has been building since 2008 when new registrations fell below the 300,000 threshold to 289,000 units, research from BCA suggests.

The financial crisis in 2009 saw sales of new vans fall further to 186,000, before rising year-on-year to 260,000 in 2011.

Peter Cooke, professor of automotive management at the University of Buckingham Business School, predicts in a report commissioned by BCA that the market will feel the full impact in 2013/14 when low new LCV volumes from 2009 come up for replacement.

He said: “Supplies of good quality, younger used vehicles are already limited and there is a strong likelihood the market will be starved of these over the next few years.”

The majority of new LCVs are bought in large numbers by a relatively small group of large fleets – utilities, Government, local authorities, short-term rental and logistics companies are among the major buyers.

However, these fleets have extended operating cycles and cut vehicle numbers to find much-needed savings in the difficult economic climate.

For example, Openreach, part of the BT Group, cuts its fleet of 24,000 vehicles by 2,000 in a single year – 95% of which were vans.

As a result, it saved £8-10 million in leasing costs alone in the past year and it’s aiming to reduce its fleet by a further 800 vehicles during the next year.

Cooke said: “The used LCV market equilibrium has clearly been upset over the past four to five years by the steep drop in new LCV sales, a reflection of the most severe and lasting economic downturn on record.”

Sales volumes for the first seven months of 2012 are down 7.8% on the previous year at 138,699 units – with the rolling year total standing at 248,452.

The effect of a shortfall in used stock is already being seen in the used market. Monthly values in the fleet and lease LCV sector improved from £4,965 in June to £5,029 in July, according to figures from BCA.

The year-on-year figures again highlight the longer-term value growth across the fleet and lease sector. July 2012 was £416 (9%) ahead of the same month last year – despite the average van being two months older and 9,000 miles higher this year.

Duncan Ward, BCA’s general manager for commercial vehicles, said: “Values remain relatively high because there is a real shortage of good quality, ready to retail used vans, which is leading to fierce competition and generally rising values for the best examples reaching the remarketing arena.

“This stock shortage is a long-term issue and is unlikely to change while new van volumes languish well below pre-recession levels and the wider economic conditions remain so challenging.”

Year-on-year, Manheim’s July market report also supports the view of the used LCV market.

For example, car-derived van values are up £154, despite being two months older; while smaller panel vans have increased their value by £101, despite being three months older and having over 6,000 more miles on the clock, compared to the average vehicle sold at auction last year.

Glass’s highlighted the potential for a shortage of stock two years ago when it said if there is to be less used stock to retail, “the necessity will be to remarket each vehicle to its maximum potential”.

The vehicle market analyst added: “This will be of benefit to all, from manufacturers and their customers, who should receive an RV uplift, and each stage along the wholesale chain where potentially, more profit per deal can be taken.”

 

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