Used car market shows signs of recovery as valuations level

Used car valuations have suffered more than most with the year-on-year decline in October for all 12 month old cars increasing on average from over 20% to 24%. However amid the gloom, there is the odd shoot of recovery as the latest figures from the HPI Used Car Valuations Index reveal.

The latest figures show twelve month old City cars are seeing depreciation values slowing down, a trend that has continued for some months, and Superminis/small cars have seen the rate of depreciation level out. Encouragingly, three year old City cars and Superminis are also beginning to see the rate of depreciation level out, offering small signals of hope for the market.

The overall picture is however grim. Three year old cars as a whole have slipped from a decline of 25.5% to an even more staggering 28.1%. Further analysis of fuel type, shows it is the three year old petrol cars that have reported the greatest and most worrying decline, increasing from 27% to a shocking 30%.

Look even closer at vehicle sectors and it is the three-year-old petrol MPVs and 4x4s that have yet again taken the biggest year-on-year tumble, with valuations now running at just two thirds of what they were this time last year. Incredibly petrol MPVs have now fallen 34.5 per cent and 4x4s, a wallet-busting 39.8 per cent.

In addition to a lack of consumer confidence, there is also a shortage of quality wholesale stock due to four main factors.

1) Fleets are not de-fleeting and are actively extending existing contracts.
2) Many fleet vehicles are being marketed for secondary leases, especially large 4x4s
3) Dealers are not doing enough retail business to generate the usual number of part-exchange vehicles.
4) Many dealers are keeping older than usual swappers as retail stock

The situation concerns HPI’s Valuation Expert, Martin Keighley: “The new market could be the key to recovery or failure. Manufacturers continue to tell us that new prices have to keep rising, due to increased costs, but this logic flies in the face of a true market where house, used vehicles and even oil prices are falling. Reliance in web based car sales sites for ball park valuations is therefore extremely misleading. There is no substitute for experience and independent market research. Used values for November are generally down apart from smaller cars which remain stable. We can expect further falls for December.”