Quality used retail stock remains scarce

Pressure on dealer margins will be eased by cooling trade values, reflected in the April edition of CAP Black Book.

One of the most challenging aspects of the marketplace for dealers this year has been the squeeze on margins caused by recovering trade values during the first quarter of 2011.

Black Book researchers have reported a growing appetite among dealers, unable to pass on the additional costs of acquiring stock to already hard-pressed consumers, for a reduction in values.

However there is no sign of an end to the shortage of retail quality stock in a market which is seeing overall volumes rise, according to CAP.

Black Book editor, Tim Bearder, said: “This has so far been a very strong year for used car business and several major dealer groups have revealed that the first quarter was their best trading period for a long time.

“Franchise dealers in particular have been helped by low volumes on new cars leading to more focus on used.

“But as well as strong retail business they have also been enjoying considerable success in the sub-£3,000 sector, with trade disposals repeatedly described by Black Book researchers as ‘on fire’.

“However, in the retail market – especially for those who are retailing sub £6,000 cars – this year’s recovery in trade values has put a real squeeze on margins because dealers have found they cannot pass the additional costs on to consumers.”

The April edition of Black Book identifies a major influx of ex-rental stock as instrumental in “tightening the lid on trade values” as some manufacturers incentivise rental operators to place fresh new car orders.

Another significant factor is the number of high mileage upper medium cars now returning to the market.

Tim Bearder said: “One of the challenges for the market over the coming weeks and months will be the shortage of sufficient quality retailable 3 year old stock. Here disposers have the chance to benefit by ensuring their stock is offered in sufficiently attractive condition to take advantage of dealers’ appetites.

“In terms of values there will be inevitable pressure on late plate values from rising volume and deals on new.”