LCV market remains strong with used values up 3.6%

Cap HPI says that the used van market remained strong in September across the majority of sectors with average values up by 3.6%.

Stock shortages, uncertainty over future supply and the demand for used LCVs sums up market activity for the past month, and most likely the foreseeable future, it says.

On average, a three-year old LCV is worth 18% more in October than the equivalent vehicle at the same age and mileage was in January, as prices have risen beyond all expectations since lockdown.

Goods carrying vans continue to perform exceptionally well with demand for vans which can carry supplies of parcels remaining consistently high. It is expected to increase as Christmas approaches. 

September was an exceptionally strong month for all LCV sectors except minibuses, which continue to struggle.

People carriers continue to decline in popularity in line with passenger restrictions and reducing journeys, whereas the demand for panel vans goes from strength to strength.

With high conversion rates at most sales, even the Euro 5 engine models have been making strong prices, it said.

Steven Botfield, senior editor, commercial vehicles and motorcycles at Cap HPI, explained: “2018 was dubbed the year of the van, and then 2019 experienced a setback with Brexit fears and all of the economic implications that it should have brought.

“Looking at this year and the demand for vehicles for home deliveries and the ‘one man – one van’ ethos to meet social distancing responsibilities, our LCV values have increased, on average, by almost 15% since July for a three-year-old vehicle.

“Used stock is still in high demand, but condition will play a part on the number of days to sell and ultimately the sold values – as the time it takes preparing vehicles and cost of repair will impact on the sold values achieved.”

The latest SMMT figures highlight that registrations for new light commercial vehicles (LCVs) surged ahead in September, growing by 26.4% when compared to the same month last year. 

The victory is short-lived, however, as September 2019 was a particularly weak month for registrations due to the introduction of regulatory changes that distorted the market.

September 2019 saw the launch of Worldwide Harmonised Light Vehicle Test Procedure (WLTP) and it appears that this affected registrations due to vehicle availability. 

The loss in global vehicle production has left a huge gap in the supply chain, not just in the UK but across the world, which will take a long time to recover, says Cap HPI.

Franchised dealers are running very low on new vehicle stock with long lead times being quoted for any new orders and at the same time struggling to fulfil existing orders.

LCV operators are deferring vehicle replacement and extending leasing contracts with many leasing companies also struggling to procure new vehicles.

Cap HPI also says that there are backlogs with body/conversion companies delaying the commissioning of new vehicles.

With market prices continuing to climb, the vehicle leasing industry faces a Catch 22 situation, it said. As vehicle residual values continue to increase, they are restricted in writing new business due to new vehicle supply problems and the unwillingness of operators to end existing contracts.

Botfield said: “Looking ahead, we remain mindful of the volatility of the used LCV market and that any situation can change rapidly.

“Pent up demand and a desire to own some stock that hasn’t been seen for a while can often lead to a feeding frenzy. This can drive up prices beyond their true worth only for them to come down again as the market stabilises.”