Converging supply factors point the way to a post-Easter used car market slowdown
Written by: Derren Martin
Pressure on used car trade values could ramp up significantly around Easter, with more volume entering the market as buyer demand reduces.
That’s the message from CAP Black Book Live, the independent real-time used car pricing tool relied on by automotive professionals across the UK.
An Easter holiday used car market slowdown is nothing new, say CAP’s valuation experts. It’s also a time of dealer caution around wholesale stock prices because that’s when they begin to anticipate a decline in demand that often occurs during late spring. Added to this, an influx of part-exchanges caused by a March new car plate sales bonanza also inevitably increases supply, which tends to hold values back.
But additional supply factors will also come into play this year – and these are likely to cause a greater imbalance in supply over demand – just as the used car sales slowdown is firmly under way.
Delivery times for many new cars have been rising. Manufacturers no longer build as many cars for stock – bitten in the past by the heavy cost of having thousands of cars sitting in fields waiting for a buyer. This means that when new car demand increases, factory lead-times almost inevitably lengthen as cars are no longer simply bought “off the shelf”.
The March order books for franchise dealers are strong, but a significant proportion of those cars will not be delivered in March, due to production bottlenecks. What is important for the used car market is that this will hold many part-exchange vehicles back from entering the market until around Easter when growing numbers will land in an already slowing market.
Another factor is an increase in the number of three-year-old cars returning to the market over the coming months – a result of the new car market ‘watershed’ of March 2012 when registrations began a relentless period of growth which continues to this day.
“We are expecting the convergence of a more significant increase in supply with a normal seasonal reduction in demand that tends to begin during the Easter school holidays” explained Derren Martin, Senior Editor of Black Book Live.
“The conditions we are likely to see in the market are exactly in line with CAP’s published expectations for 2015, so there is no cause for alarm and we are certainly not predicting anything like a market collapse.
“This year the market will see more consistent downward movements in trade values throughout the year, as more cars than we have seen for several years enter the used market.
“Our advice to those who wish to most efficiently manage their exposure to falling values – or make the most of the opportunities a market turn can offer – is to track values daily, using Black Book Live, rather than relying on traditional monthly valuation guides.
“Black Book Live users will see any market change as soon as it happens, rather than waiting until the following month. If values do move, as we expect during early April, users of CAP live valuations will have a distinct advantage over those who will not receive revised market valuations until May.”
More from Derren on the current used car market can be heard on the CAP podcast channel.