LCV values and volumes slide as demand weakens
The first tangible signs of price pressure and falling demand in the used commercial vehicle market were recorded in April, according to data released by BCA.
Figures for April show that average values fell by £211 (just over 5%) compared to March, while sold volumes declined significantly by over 31%, month on month. Sold volumes had been climbing since the December lowpoint, when trading activity was significantly constrained by the severe winter weather.
Values averaged £3,969 in April, the first time values have dipped below £4,000 in 17 months and the lowest monthly average since November 2009. Performance against CAP also came under some pressure, with the average figure falling to 97.5% from just under 99% in March. Year-on-year values remain well behind 2010 figures - April 2011 is down £664 (14.3%) when compared to April last year (which admittedly remains the highest average value on record).
It is notable that last year values continued to climb in April, before falling sharply into the summer months following the General Election and the realisation that UK PLC needed to tighten its belt quite dramatically. This year, the combination of increasing fuel costs, the late Easter, the Royal nuptials, and the hottest April on record arguably disrupted trading towards the end of the month.
Volume decline was sharp in the fleet & lease LCV sector, where sold numbers decreased by over 34% in the month, with much of the early termination product seen this year to date now washed through. Despite this, average values only fell by £68, equivalent to a 1.4% decline compared to March. Year-on-year values are adrift by £552 or 10.8% - again a very similar differential to the March figures. Fleet vans averaged 97.3% of CAP in April, over a point down compared to March.
For the second month running, values fell sharply in the part-exchange sector. Values averaged £2,308 – the lowest monthly average since July 2010 and the second lowest figure recorded in 20 months. CAP comparisons continued to decline, falling from 99.48% in March to 96.46% in April from the high of 101.09% recorded in February. Year-on-year values are behind by £407 or 15%.
Having established a new record value of £12,397 in March, nearly-new values tumbled in April to an average of £10,748. As always, this has to be taken in the context of the low volumes reaching the market and the model mix factor and, in fact, performance against CAP improved again, reaching 106.58%. It is notable, however, that new van sales have been much improved this year and manufacturer incentives can make the nearly-new market look expensive.
Duncan Ward BCA’s General Manager – Commercial Vehicles commented, “We have been saying that buyer confidence has been quite fragile for some weeks now and in April we saw the first real concrete evidence of a softening in demand.”
“As always, the balance between supply and demand is the critical price driver, and with greater volumes coming into the market and little increased appetite for stock over the unusual trading conditions in April it was inevitable that values, sold volumes and conversion rates would slip. The coming weeks will be a real test for a marketplace which has performed pretty consistently since the turn of 2010.”
“An optimistic view is that at whatever level business confidence may be, there is likely to still be an underlying shortage of stock resulting from the new registration slump - which is only now starting to turnaround. Demand maybe less, but with less to choose from, we just might see prices rally again before the traditional slowdown in the summer months.”
“LCV sellers should look carefully at their remarketing plans and objectives between now and the autumn months, and ensure their stock is well prepared and sensibly valued in line with market expectations.”
Ward concluded “The used LCV market could be in for a bumpy ride in the short term, particularly as there are few signs of the economy improving and there is a distinct lack of confidence in the small business sector. SME’s and sole traders are the key buyers of used vans and if this sector is being cautious then it will have an immediate and detrimental affect in the wholesale commercial vehicle markets.”
