Used car markets still rising but price pressure increasing
BCA’s latest Pulse report shows that average values rose marginally in February, largely due to a richer model mix in the nearly-new sector. Values across the board increased by just £11 compared to January’s figure to reach £5,985 and are at the highest point recorded since December 2009.
Performance against CAP Clean dropped by over a point to 97.4%, down from the 98.6% achieved across the board in January. Year-on-year, February 2011 is ahead of the same period last year by just £26 – less than half of one percent.
However, values came under pressure in both the bigger volume sectors - fleet & lease values fell on average by £186 (-2.4%) while the part-exchange sector fell by £39 (-1.3%). In the more volatile nearly-new sector where mix is critical values improved notably over January, rising by £2,208 (12.5%).
With entries rising and demand softening, conversions have come under increasing pressure in February.
Fleet values fell by £186 to £7,553 in February, with CAP performance dropping by just under a point to 97.7%. Year-on-year values are ahead by £189, equivalent to a 2.5% rise. Model mix will undoubtedly have had a part to play in the average value decline, with a lower percentage of higher value premium cars sold in February compared to the previous month.
There was a smaller decline in the part-exchange sector, which fell by £39 to £2,798, halting a run of three consecutive monthly value improvements. Despite the fall, February’s average value was the second highest on record, underlining the relatively high levels of demand in the budget car sector. Performance against CAP fell back by nearly three points over the month to 92.7%. Year-on-year, the February 2011 average value was £140 (5.2%) ahead of last year.
The nearly-new sector saw values rise sharply, with over £2,200 added to the January figure to reach £19,827. Model-mix was largely responsible for the increase with sold volumes of higher-value premium cars increasing by nearly 20%, while the number of volume models sold decreased by around 8%.
BCA’s Communications Director Tony Gannon commented “Following a very strong start to the year in January, used car demand has eased off a little in February thanks to a combination of increasing volumes and a reported softening of retail interest in the past two or three weeks.”
“While that slowing in demand has yet to manifest itself in the overall average price – largely thanks to a changing model mix that saw a greater number of high value premium cars sold in February – it is likely that we will see more tangible evidence in the next few weeks as volumes start to rise in late March.”
“Although it is early days, we would expect to see defleet volumes ramp up in late March and this will possilbly result in some more price pressure in the fleet/lease used car sector.”
“Dealer part-exchange volumes will increase, but with continuing demand in the budget sector it is likely prices will remain relatively firm.”
Gannon added “The overall economic picture remains gloomy, however, and consumer confidence is fairly low. High fuel prices are contributing to rising inflation, as well as the knock-on affect of the VAT increase – it all means motorists are likely to be looking to reduce their costs going forward.”
He concluded “Vendor strategy is going to be increasingly important in the weeks ahead. Easter and the Royal wedding both fall into the same week at the end of April and it is quite possible that the wholesale market will soften around that time. Sellers should ensure they make the most of the demand in the intervening weeks.”
