News

VRA monthly update

Time 1:18 pm, April 12, 2011

vralogoTHE Vehicle Remarketing Association has launched a monthly headline report into the remarketing sector.

The VRA report looks at a number of the factors which drive supply and demand across the entire industry,  taking input directly from its 50 large corporate members who between them handle more than 1.5m used vehicles per annum.

Designed to act as a market commentary rather than a detailed report, ‘Remarketing Update Monthly’ takes a snapshot look at the prevailing dynamics and the likely short term outlook for supply and demand.


Jon Davies, chairman of the VRA, said: ‘By having such a diverse membership base covering major inventory owners, plus the leading suppliers of the broad range of remarketing services, we are able to take a pretty comprehensive view across all sectors. Remarketing is the true barometer of the automotive industry and we believe our new monthly commentary will be a very useful market indicator.’

The latest reports shows:

Stock shortage

Used car supply continues to struggle to keep up with demand. However, VRA members report that used retail demand seemed to peak in early to mid March, slowing down slightly towards the end of the month.

Many car manufacturers are reporting much lower used car stocks on dealer network forecourts than is customary at this time of year, with some suggesting it could be as much as 15 per cent down. Generally, this simply reflects the shortage and availability of retail quality stock.


Delivery delays

In the fleet sector, increased delivery delays from manufacturers are making the used car supply situation worse, as leasing companies see fewer cars coming back for remarketing. Many customers have been waiting for six–nine months depending on the brand; with customers being forced to extend contracts until their new cars arrive.

A by-product of these increased contract extensions is a rise in both the incidence of damage on returning vehicles plus an increase in the average value of damage and thus recharges. This trend is set to continue for some time if companies continue to increase replacement cycles to cater for longer delivery periods.

‘The signs on the high street generally suggest that retailers are not confident and have already begun heavy discounting’

Values and demand

Prices in March rose in the first half and levelled off in the last two weeks, resulting in a small overall rise for the month but less than would be expected at this time of year.

Perhaps the early signs of shifting behaviour, driven by the slow economic recovery are now being felt, with values of most small and medium vehicles remaining fairly strong, whist prices of compact executive and larger executive models came under pressure. Used car buyers seem now to be opting for smaller engined versions of the car they are considering buying.

Older vehicles

Particularly noticeable was a weakening appetite for very high mileage cars – over 100K miles – and unless price adjustments are made to reflect these levels of usage, many will struggle to find new homes over the coming months. This will be even further exacerbated where disproportionate damage is present.

Some franchised dealers are being more creative with their older part exchanges as they explore new areas of revenue and profitability. Instead of putting part exchanges straight into auction, some are setting up small used car pitches under a separate brand and are selling these older cars directly to the public.

This in turn, is providing some food for thought for the manufacturers who have to look at the parameters and suitability of their approved used programmes in the light of more dealers retailing older stock. Warranties and other elements of the programmes are also coming under scrutiny and review, as the average age of used stock on forecourts increases.


Outlook

Looking ahead, April is already being viewed as a potential challenging month for new and used car sales and this will be further compounded by the four public holidays and distractions of the Easter school break and a Royal wedding, falling at the end of the month.

We’ll just have to wait and see how much of an issue this becomes for the used vehicle industry, but the signs on the high street generally suggest that retailers are not confident and have already begun heavy discounting in advance of the disruption.

James Batchelor's avatar

James – or Batch as he’s known – started at Car Dealer in 2010, first as the work experience boy, eventually becoming editor in 2013. He worked for Auto Express as editor-at-large and was the face of Carbuyer’s YouTube reviews. In 2020, he went freelance and now writes for a number of national titles and contributes regularly to Car Dealer. In October 2021 he became Car Dealer's associate editor.

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