Franchised CV dealers hardest hit by tough trading conditions
Over the next twelve months franchised dealers will be the hardest hit of all used commercial vehicle retailers, with the slowdown in new vehicle registrations and the fall in residual values impacting on their already-dwindling profitability, according to EurotaxGlass’s.
George Alexander, editor of Glass’s Guide to Used Commercial Vehicles, has suggested that, while independent dealers are relatively well placed to respond quickly to the changing economic climate, the likely fate for franchise holders will be dictated primarily by the restrictions on the vehicle types which can be offered to an increasingly selective market.
“Franchised dealers are almost uniquely vulnerable to a market downturn,” he said. “They suffer all the disadvantages – such as falling inventory values and fewer customer enquiries – yet are restricted in how they are able to react to such hostile conditions. The franchise agreement encourages dealers to invest in big sites, meet corporate standards and take on massive amounts of debt. These commitments, however, leave dealers poorly placed to trade their way out of difficulty.
“Such prestigious outlets are often unsuited to, or possibly prevented from, offering an array of competitive products to tempt cash-strapped customers. To make the most of the prevailing economic conditions, dealers need the freedom, and the necessary finances, to stock older vehicles which represent a profit opportunity, rather than just new and late-plate examples that rapidly become distressed sales.”
While the focus on the bottom line is sharper than ever, Alexander warned against a knee-jerk reaction from dealer boardrooms. “In previous downturns staff numbers have been reduced to cut costs. There has been little evidence of this unwelcome practice in recent months, and management teams would be wise to remember that the expertise lost as a result of such an approach will be difficult to replace when economic prospects improve in 2010.”
Used CV market – key trends
George Alexander highlights other key trends in the used CV market:
Wholesale market
In early September, as the holiday season ended, auction halls witnessed reasonable levels of attendance. Though the marketplace was not wholly transformed, there has since been plenty of buying activity. It must be noted, however, that prices have moved down over recent weeks and, in the case of double-cab 4x4s, prices are now much lower. Over the short term, these ‘adjustments’ should offer some relief to vendors who had feared much worse. The threat of plummeting prices and a dormant market over a prolonged period have, for the time being, been averted.
Used light vans
Used sales are slow and are unlikely to improve this year. At auction, when offered in sensible numbers, good-looking lots with low, warranted miles perform well enough. If volumes are increased, however, prices fall – fluctuating volumes disguise the true worth of these smaller vans.
Renault’s Clio, Citroen’s C2 and the Peugeot 206 attract good interest when presented in A1 condition and Ford’s Fiesta continues to find favour, remaining the preferred choice.
Cleanly presented, high-powered Vauxhall Combos and Fiat Doblos are making some headway although they remain susceptible to the threat of competitive deals on newer and fresher-looking models.
The Renault Kangoo, Citroen Berlingo and Peugeot Partner are suffering. High volumes have come off fleets and, accordingly, price weakness is commonplace. VW’s Caddy leads the way in this sector, particularly when equipped with suitable extras. Ford’s Connect continues to lose ground, being readily available on the open market. Any examples presented in poor condition, or with high mileage, tend to sell for prices that disappoint the vendors.
Used 4x4s
Only the best-presented examples of high-specification, double-cab pick-ups achieve Guide Trade. Those showing damage, looking tired, offered without documentation, or presented with higher than average mileage will sell below Guide Disposal.
The Toyota Hilux is faring best, with prices close to Guide. Single-cab 4x4 pickups from Ford and Japanese marques have found favour in the marketplace – this situation should prevail as we move into the winter.
The saga for double-cab pickups continues and, at the moment, it appears the more ‘bling’ attached to any used example the sharper the price drops. Later-plate, high-series models are suffering most of all.
For Nissan’s Navara, both new and used markets have slowed sharply and are unlikely to recover in the near future. Ford Rangers struggle, with very low prices for some used models. This situation is not being helped by pre-registered stock being offered at prices that represent enormous savings on new.
Used panel vans
Models boasting additional equipment, such as air conditioning or metallic paint, fare considerably better than basic vans. At auction such lots attract plenty of interest, although the economic downturn has seen prices slip particularly for many late-year examples.
The Renault Trafic, Vauxhall Vivaro and Nissan Primastar are finding willing buyers without too much difficulty, despite increasing volumes. At auction, clean Toyota HiAces turn heads, ensuring a consistently strong performance against Guide. Likewise, older Nissan Vanette, LDV Cub and similar sized vans in clean condition sell readily.
Demand for the best VW Transporters remains firm, with the Sportline model still being the van that customers aspire to despite its high list price proving a barrier to many. The T5 continues to outperform the competition in the medium panel van sector, with trade and retail buyers paying Guide money for clean stock.
With a noticeable increase in volume of 3.5 tonne vans at auction, buyers can now pick up the best examples at lower prices. Particularly affected are the Fiat Ducato, Citroen Relay and Peugeot Boxer, as well as their Vauxhall and Renault counterparts. Latest-shape Ford Transits in top condition continue to perform strongly but, as lead-times ease, there is growing downward pressure on prices.
Demand for minibuses has held up fairly well with prices less affected by the summer market lull. VW Caravelle, Shuttle buses and T5 Window vans (with one-tonne payload) continue to be popular. Traditional minibuses with 12, 15 and 17 seats are finding the going tough and will inevitably struggle unless presented in first-class condition.
At auction, prices for Ford Transit 350 double-cab tippers, regardless of age and mileage, are falling well short of Guide Trade. Tippers and dropsiders have suffered most with some Guide values falling sharply. As lutons and boxes in clean condition are still only available in low numbers, prices have remained more stable.
Used heavyweights
Despite a deteriorating economic landscape, recent auctions have shown that there is underlying market strength for a varied selection of heavy vehicles. Impressive crowds in the halls are made up of a fair number of tyre-kickers, but a nucleus of buyers secure most lots either provisionally or outright. Late-year trucks make most of the running, but their prices have certainly slipped – with lead times for new chassis shrinking following order cancellations, further downwards price movements on used examples are inevitable.
Though tippers and dropsiders still appear to be in favour, the expectation is that the market will soon feel the pinch as a result of the widely publicised difficulties in the construction sector. Three- and four-axle tippers and hookloaders have lost some of their appeal.