Varying replacement cycles create pillars in used LCV market

There are two distinct pillars emerging in the used LCV market, as volumes of vehicles aged two to four years and those over six-years-old witness colossal year-on-year growth, according to Shoreham Vehicle Auctions.

Public organisations and utility companies, such as parcel delivery and telecommunication outlets, are a major driving factor as they look to maximise the life of vehicles in their fleets beyond the usual three to five year rotation.

As replacement cycles extend to six years and over volumes are being boosted by an influx of LCVs aged six years and over, says Shoreham.

Companies within the sector are known for properly maintaining vehicles, resulting in optimised residual values despite falling conversion rates. With volumes of LCVs aged six and over increasing 22% between March 2014 and March 2015, the overall market is benefiting with total sales of all LCVs up by 23% year-on-year.

Meanwhile, a second pillar is being created with LCVs aged between two and four years as rental and leasing companies de-fleet their vehicles on a short cycle.

There has been a 30% year-on-year increase in sales volumes of used LCVs in this age bracket.

Between the two pillars, the four and six-year-old LCVs are falling behind in terms of volumes, despite steadily increasing year-on-year volumes.

The abundance of older but well maintained LCVs, which offer good value in comparison, is shifting demand to older, cheaper LCVs. Increased volumes of newer LCVs is also pushing demand with more choice in the marketplace.

“Increased supply and volumes of newer LCVs, especially those aged two to four-years-old are putting pressure on prices, while with LCVs aged 4-6-years old, supply levels are struggling to satisfy demand,” says Alex Wright, managing director of Shoreham Vehicle Auctions.

“Increased supply levels mean buyers have far more choice with vehicles aged two to four and six and over.

“Meanwhile, the middle ground – vehicles aged 4 to 6-years-old – is suffering from a comparative lack of volume.

“This lack of choice, combined with the appeal of cheaper, older, well prepared LCVs aged 6 years or more is an appealing alternative to buyers.

“Those looking to invest in four to six-year-old vehicles are now investing in one of the two pillars in the market, from a lack of supply in the middle ground.”