2:18 am, December 11, 2010
Many a mention has been made here of the government’s cash-for-scrap scheme, and its effect on the new car industry, where sales are up and the Koreans are raking it in.
But little has been made of what it means to the used car market – and specifically the murkier end of the trade, where £3k is top dollar, and most cars go out the yard for £995 with a full MOT.
As a trader, you’ll either love or hate cheapies. Personally – and you may have noticed this from the tone of previous columns – I’m a bit of a fan. Ok, so I might make somewhere in the region of four or five grand on a good high-end sale, but sometimes it’s less effort to turn round a dozen ‘PX to clears’ and enjoy the same kind of margin.
Except that supply of such vehicles has pretty much dried up. Thanks to a legion of retirees who have decided it’s time to chop in their mint Granadas and Rover 800s and downsize to something a little more appropriate for their advancing years, all of the decent, low mileage, low owner older stock has landed in the crusher, its place on Planet Earth now taken up by a Hyundai i-Wotsit or a Daewoovrolet.
But don’t despair, for while demand currently exceeds supply at the bottom end of the market (I have proof: I got four hundred quid for a 16-year-old Skoda Favorit last week), what this sudden upsurge in prematurely demolished 10-15-year-old motors means is that if you do pay a little extra than you may have done last year to get behind the wheel in the bargain basement, running costs have never been cheaper.
Why? Because all of a sudden there’s an overwhelming supply of used parts. Time was, a good part-worn tyre would cost around £30. Today, halve it. A used battery was £40, today, a tenner.
And these are just consumables. When you consider that the top scrappage cars, in no particular order, are Nissan Micras, Rover 200/400s and Ford Escorts, the benefit of buying one of these models right now is that every scrapyard in the country will have four of the bit you’re looking for when it breaks down. eBay will be overwhelmed by desperate junkyards wanting to offload some of their surplus components.
And because there has been a temporary dip in scrap metal prices, the yards aren’t in a desperate rush to put them through the bailer – knowing full well that the Chinese economy is on the verge of another government-sponsored kick up the jacksie, the price of scrap metal is expected to rise again in 2010. It won’t last forever.
So while the scrap scheme isn’t brilliant for all, its macroeconomic effect has been fascinating – from the way it has sustained some of Europe’s biggest car companies that were on the brink of collapse, to the way it has passed down the whole supply chain to the cash-only lay-by trader.
Perhaps the best way of summing it up is to once again reintroduce my old pal Billy Two Bags. Billy, as you may recall from previous columns, gets his name from his fixed-price approach to used vehicle sales – £2k, it’s yours, regardless of what ‘it’ actually is.
He’s been raking it in since the scrap incentive scheme landed – a lack of finance for people to buy newer used cars, those in the lower reaches being forced to spend a little bit more to get what they want and a wholesale stabilisation of the lower end of the motor trade have all left him somewhat in the pink.
In the past, I criticised Billy for having some rather stale looking stock that was critically overpriced – but these days his lot’s half bare, he’s even cleared the rubbish from ‘Poo Corner’, and we’re thinking of changing his nickname to Billy Three Bags...
