Black Book reports signs of stability for used car market in May

Following two months of record price rises in the used car market values are now stabilising according to CAP Black Book, the benchmark trade guide to used car pricing.

It marks the apparent end of a year of extreme volatility, beginning after Easter 2008 with the sharpest sustained downturn in memory and switching to an unprecedented upturn from January to April this year.

It means used car trade prices have clawed back some of the value lost during the downturn, taking them back to November 2008 levels.

One of the main drivers for stronger used values this year has been a shortage of used car stock, caused by a combination of few part-exchanges due to the slump in new car sales, lower production leading to fewer late plate cars and the extension of some leasing contracts keeping fleet cars out of the market. More volume is, however, expected to enter the market during the next few weeks as confidence among disposers continues to grow.

Many dealerships and dealer groups were reporting stock levels typically in the region of 30 to 50% lower than they would prefer during April. As well as the frequently reported general shortage of cars in the open marketplace dealer stockturn has also seen considerable improvements, typically reducing from 90 to 45 days. It is now noticeable that those franchise dealers who are not constrained by manufacturer standards rules are routinely displaying multiple brands on the forecourt, where normally their own badge would be almost exclusively represented.

The end of the first quarter’s clamour for stock, however, is signalled by leasing company average conversion rates reducing from their highest ever level of 95.4% a few weeks ago to 86.6% this month - although this is 14% higher than at this point last year.

The relative performance of different car sectors has been maintained, with 4x4s enjoying the strongest rises in value and superminis and city cars seeing the smallest change. This is still believed to represent a typical ‘bounce’ following a sharp slump, with those vehicles which lost the most value seeing the strongest recovery.