CAP points to consumer demand keeping depreciation steady at 1.2%

10:13 am, July 29, 2015

CAP says steady consumer demand has kept the wholesale vehicle market fairly buoyant and dealers are keen to keep their forecourts stocked up.

With volumes in the used-car market high, and ahead of the same time last year, values in general edged down in Black Book Live during July, but only resulting in a month-end drop of 1.2 per cent at the three-year, 60,000-mile mark.

Of the main volume sectors, SUVs were the hardest hit, because of large volumes in the market and partly the time of year. The Nissan Juke and Skoda Yeti saw values drop in July because of high volumes in this ever-growing SUV sector – which has seen 125 per cent increases in used-car sold volumes over the past five years – and is likely to remain under pressure in the long term, according to CAP.

Derren Martin, senior editor of CAP Black Book, said: ‘Depreciation over the past two months has been slightly lower than anticipated. Will the market catch up with where many expected it to be? We have reported many dealers are seeing margin compression. When accounting for high volumes in the used-car market, and a likely increase in the long term, there is the potential for some pressure on trade prices.

‘August is likely to lead to a small drop-off in consumer footfall, so the supply-and-demand balance may promote further price erosion. Longer term, there could be added pressure with a new registration plate looming, resulting in more fleet returns and retail part-exchanges.’

Upper medium, or D-sector cars, fared slightly better than the average in July and this could be because of stable volumes in the used-car market. Used-car sales volumes in this sector are down two per cent since 2010. Values of common ex-company cars such as diesel variants of the non-current BMW 3 Series, Ford Mondeo and Vauxhall Insignia all stayed level in July, showing they remain a popular choice for the used-car buyer, and represent good value when priced against many of the SUVs.

Values of convertibles declined in July, particularly from the middle of the month onwards. The worst affected were those cars that appeared in higher volumes, such as the previous version of the Audi A3 convertible and the current Volkswagen Golf convertible.

The pace of convertible depreciation has steadily increased over the past three months in Black Book Live, moving from just 0.2 per cent during May, to 0.8 per cent in June and then 1.6 per cent in July. The window of opportunity is rapidly closing for these cars – if a dealer is looking to buy wholesale in August, by the time the car is prepared and on the forecourt, summer will more than likely have passed.

Martin added: ‘We are entering an interesting few months for the used-car market. At this time last year, contract hire and leasing companies reported a drop-off in their sales. What followed later in the year was high supply and low demand and this led to not insignificant pricing realignments.’

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