CAP predicts rising used car values

Growing demand is expected to drive the values of many used cars up in the coming weeks, according to CAP Automotive.

Following a lull in trading conditions, which saw values fall in the last quarter of 2013, the used car market is showing early signs of strength in January 2014.

According to Black Book Live – CAP’s real-time guide to used car values – demand is growing fast for the best quality cars.

But CAP experts also warn that the volume of cars in general, and those in average and poor condition in particular, is growing ahead of expectations.

It means that any dealers who failed to acquire sufficient stock of retail quality in November and December – when prices were at a low point – will now have to work harder to keep up with demand.

There are also early signs of a growing trade appetite for convertibles. These are now perceived to be at their lowest value point in the annual cycle, so many buyers are looking to build convertible stock before the return of milder weather pushes values back up.

Derren Martin, senior editor of Black Book Live, said: “We reported at the end of November that there were signs of dealer stocking activity, ready for the New Year, and we are now seeing the fruits of that. This is because the availability of good condition stock is becoming an issue, which means prices are being pushed up for the most desirable examples.”

For dealers the biggest challenge over the next few weeks will be protecting profit margins in a rising wholesale market. But some of the biggest beneficiaries of the current market picture are likely to be motorists with a high quality car to trade in.

Martin said: “In a market like this, dealers are always faced with difficult choices. Lower quality stock is abundant and affordable, but will attract significant refurbishment costs and take time to prepare for retail. The best cars will inevitably cost more in the first place, so dealers may have to price them at a premium on the forecourt.

“The biggest winners will probably be motorists with a well maintained, low mileage car to sell or swap, because dealers will undoubtedly be very keen to do a deal if they see the chance of a strong profit opportunity from the trade-in."