Rise in supply takes the edge off used car prices
Increased supply of used cars has taken the edge off used car prices in the trade, according to CAP.
It means some of the pressure has eased for dealers who were frustrated over the level of competition for trade stock forcing prices up during the early part of the year.
At the heart of the change in market conditions has been the influx of part-exchange cars into franchise dealers due to the March plate change. With those dealers now focused on retailing their part-exchanges, competition to acquire stock in the open market has reduced and this has led to a slight weakening of values.
Despite the increase in supply, CAP believes the medium term stability of the used car market is not threatened.
CAP’s Mike Hind said: “A year ago the increase in volume was much more of a cause for concern because it was largely driven by dealer self-registrations. This was due to severe weakness in the new car market and it meant a sudden and large influx of late plate cars into the market.
“This time more of the March new car sales represented genuine business and the fact that there are around 15,000 fewer 0-12 month old cars advertised for sale at present than a year ago is evidence for that.
“The dynamic in the trade market has clearly shifted from that of a few weeks ago when franchise and independent dealers were competing hard for every quality used car and consequently finding it difficult to maintain satisfactory profit per unit. Now the heat is off we are hearing reports that margins are improving for many. Although franchise dealers have not completely given up buying in the open market most had finally managed to fill all their longstanding forecourt spaces by the 3rd week in April.
“Franchise dealers are also readjusting their used car profiles to focus back onto younger cars, which has led to something of a glut of 5 – 7 year old cars, offering much more choice in the marketplace for independents. The car supermarkets are very active in the trade market and some are being quite aggressive in their pursuit of the best cars for retail. We have seen some deploying more buyers than usual at sales, but leaving with fewer purchases, because they are ensuring they don’t miss any opportunities to cherry-pick the best vehicles.
“Despite the general increase in volume, the fact that the majority of dealers tell us that their retail business is ranging from satisfactory to strong means we believe the medium term stability of market prices is not a major concern.”