This year BCA is seeking to build on a total of over 100,000 vehicles being sold through its Blackbushe headquarters alone in 2012. The auction house is cautiously optimistic about 2013.
BCA’s Tony Gannon explains: “If anything, the stock shortage is potentially more acute in 2013 than it was in 2012 and this is likely to keep prices firm, particularly for ‘first time to market’ fleet and lease cars.
“However, as 2012 values were so strong – frequently recording double-digit year-on-year percentage increases – we are not anticipating the same large value rises this year.”
The consensus among those in the industry is that this year is likely to be more predictable than the last, with less in the way of disruptions and more consistent values from ex-fleet stock.
Glenn Sturley, remarketing director at Lex Autolease, is also of the opinion that we’re in for a more stable year as far as shifting used stock and values go: “The remarketing sector can look forward.with a sense of cautious optimism. Pricing, the key barometer of market strength, improved in the latter part of 2012 and we expect this trend to continue during this year.”
Chairman of the Vehicle Remarketing Association, John Davies, agrees, saying earlier in the year: “2013 is likely to be quite a stable used car market with prices remaining consistent. Prices are unlikely to rise as high as in 2012 but with the restricted supply of used cars coming into the market compared to three or four years ago, demand should also remain fairly consistent.”
One of the biggest differences for trading conditions this year compared with the same time in 2012 is the calendar. In January 2012, the majority of the remarketing crowd had their reservations about the Olympics, Euro 2012 and the Diamond Jubilee – and the gaps and disruptions they were likely to cause in trading.
Rui D Ferreira, vice president of fleet remarketing at rental giant Hertz, says the concerns amounted to little – a sentiment echoed by the majority of others in the industry. There were, however specialist exceptions: “In terms of affecting trading, the impact was less pronounced. There were some, albeit very specialised, examples of these events having a knock-on effect.
“For example, immediately before and during the Olympics the market witnessed a real shortage of minibuses as hotels and others prepared for an influx of visitors. This was followed by an absolute glut after the Games.”
Davies claims that, as well as the absence of big sporting events and additional bank holidays, the calendar is actually favourable to trading this year: “2013 looks a quiet year compared with 2012.”
The knock-on effects of the hard recession in 2008 and 2009 really hit home within the used market throughout 2012. The sharp drop in new car sales from that time made itself felt, with businesses having less ?three- and four-year-old stock to defleet as a result, leaving a big hole in supply. Prices therefore hit the roof, and there was a serious shortage of typical ex-fleet vehicles available.
Experts believe that the most savage price rises and stock shortages have now taken effect, so the market isn’t likely to experience the fluctuation and steep hikes it did in 2012.
According to Sturley of Lex Autolease: “The shortage of ex-fleet vehicles reaching the used car market has now peaked and we expect there will be enough vehicles to satisfy demand during 2013. In terms of pricing we do not expect significant falls due to the impact of stock shortage last year and the fall in new car sales caused by the double-dip recession.”
Ferreira agrees, saying: “We don’t expect to see any fundamental changes compared to 2012. Whilst short supply benefits residual values, the continued drought of credit is likely to balance this out.”
Unsurprisingly, clean, economical vehicles and solid ex-fleet cars in good condition are tipped to be the most desirable for used buyers. Traditional aspects such as specification and colour still make all the difference, says Sturley: “As with previous years there will be a strong demand for well-maintained vehicles, with a good specification and in a traditional colour. Vehicles that tick these boxes are likely to attract buyers.”
Ferreira claims that cars with low-capacity petrol engines may now have been around for long enough to start becoming attractive to second-hand buyers, especially with the price gap between the two major fuels at the pumps.
“Mini and small petrol vehicles are likely to pick up as consumers are not seeing the value in increased purchase price of diesel versus the pump cost and mileage travelled,” he says.
The residual value expert’s view
Editor of Cap’s Black Book Live, Mark Bulmer, believes that car manufacturers are so keen to control their residual values that they are likely to keep their vehicles as close as possible. “We anticipate some manufacturers owning more of the risk on short-term lease vehicles and perhaps even actively buying late-plated vehicles from third parties and then offering them out through their own dealer networks,” he says. “This may well mitigate the accelerated depreciation that larger volumes of pre-registered and short-cycle business can create. Fleets will benefit from a healthier credit situation in the retail used car arena.”
Despite keeping things tight on RVs, Bulmer reckons that prices for ex-fleet vehicles aren’t likely to remain as rock-solid as they were in 2012, and that businesses shouldn’t rest on their laurels: “Used car values for fleet operators were very strong in 2012. Although it is tempting to expect more of the same, such a view is a little naïve. Over recent months, more and more very late-plated vehicles have been seen in the market and, as we all know, this has been driven by manufacturers redirecting vehicles away from the beleaguered markets of indebted Europe.
“We also know that this is only made possible by a positive sterling/euro exchange rate, so that is something fleets should watch if they want to understand how supply will affect the values they achieve on disposal. If this flow of nearly new vehicles continues, values of three-year-old ex-fleet vehicles will inevitably be pushed down. In recent months CAP has seen prices of late plate and three-year-old vehicles moving closer together, but eventually the latter will move back if this pressure continues.”
He also warned of the dangers of cutbacks by Motability, as reported by BusinessCar in December, and the adverse affect that defleeting large numbers of cars could have on the used market: “With welfare reform leading to pressure on Motability drivers, there is potentially a chance of some additional cars returning before the three-year lease is up, although it is fair to say the impact of this particular Government policy cannot be precisely measured at the moment.”
