Used-car market “very challenging” in 2010, says Glass’s
Supply shortages, tighter trading margins and limited retail demand will make 2010 a particularly tough year for used-car dealers, predicts Glass’s Guide. With the expected return of seasonal used-car depreciation, success will depend on a greater focus on the procurement of trade cars and a strict policy of managing ageing stock.
Reduced supply of used cars in 2009 led to an increase in prices, despite a seven per cent drop in retail sales. “Availability of stock will continue to be severely restricted in 2010, though price movements are more likely to reflect the seasonal changes seen prior to 2008,” comments Adrian Rushmore, Managing Editor of the Guide.
Vehicle shortages will be particularly apparent in the case of late-plate models (three to nine months old), as manufacturers limit their exposure to short-term business, especially sales to daily rental fleets. “The situation will be compounded by the fact that, in the main, dealers are unlikely to be heavily incentivised to put on demonstrators or undertake self-registrations, though specific activities will vary considerably by manufacturer.
“One-year-old vehicles will also be harder to source, after new-car sales fell by 27 per cent during the final quarter of 2008.”
Further decline in retail demand
Following two consecutive annual declines in used-car sales, retail demand will not recover this year, predicts Rushmore. “The prospect of higher unemployment, higher taxation and ongoing restrictions on consumer credit will restrain demand for used cars. The turning point in every recession comes with confidence, when the buying public anticipates an improvement in their personal circumstances – sadly, this is still a critical missing element.”
He continues, “In addition, a general election is always preceded by a fall in consumer spending which is rarely fully recovered in the aftermath. And, with used-car prices around 25 per cent higher than at this time in 2009, simple economic theory indicates that motorists are less likely to buy.”
It is not, however, all doom and gloom for the used-car market. “There will undoubtedly be pent-up demand from customers who have deferred a buying decision over the last 18 months. This will not stem the continued falls in sales but should bring a degree of respite. And, while affordability will remain an issue, many customers will simply enter the market at a lower price point, perhaps looking for a vehicle outside the typical age profile of franchised dealer stock.”
Increases in new-car list prices – brought on by the continuation of weak sterling forcing manufacturers to increase prices to protect slender profit margins – will inevitably push buyers in certain segments towards nearly-new cars, giving used-car dealers further cause for optimism even though the impact will not be uniform across the nearly-new sector.
An opportunity exists for dealers who marry good pricing intelligence with strict stock rotation policies, as trade and retail price movements are related but not identical, says Rushmore. “Timely purchases on the wholesale market will allow dealers to translate lower trade prices into lower – and more attractive – retail asking prices, while still retaining an acceptable profit margin.”