Pressure continues to mount on used car margins


Written by: Mike Hind

Pressure continues to mount on used car margins as low quality trade stock brings ever higher refurbishment costs for dealers, say CAP Automotive.

According to the latest market commentary from Black Book Live – the independent real-time trade values trending tool – dealers have generally seen positive activity in terms of showroom visits and online activity during May. But finding high quality cars to meet retail demand is not proving easy.

Many of the highest quality used cars are no longer finding their way into the trade market because most PCP returns and desirable part-exchange cars are immediately turned around for retail sale.

This means dealers are increasingly picking up the ever-growing costs of refurbishment as much of the stock available in the open market is reportedly lower-than-ideal quality.

Dealer caution on prices paid in the trade, together with the high volume of cars available, is therefore precipitating a softening of values, which have typically reduced during May by 1.4% to 2.8% across mainstream sectors and as much as 3% for luxury executive and 4.1% for electric vehicles, at the three year and 60,000 mile benchmark.

Black Book Live Senior Editor, Derren Martin, expects older, higher mileage cars which have been overlooked while the market snapped up the most desirable stock, to form a significant proportion of cars available as the summer progresses. He also warns that pressure is likely to grow on late plate cars during June and July, with an inevitable knock-on effect for some older vehicle values too.

He said: “When the pre-registered cars from March find their way back into the used car market they are likely to be priced as attractively as possible by dealers to ensure they do not end up with overaged stock.

“This sometimes means they reappear in the market at lower prices than slightly older equivalents, when taking into account low deposit offers and other incentives, and this unnatural dynamic inevitably affects older values if the situation is sustained.”

CAP is not expecting the ongoing reductions in trade values to depart from the pattern established in recent months.

Derren Martin added: “Continued downward pricing movements are likely across the board, with volumes in the market not likely to decline any time soon.

“However, these downward movements are only likely to be in-line with the movements over the last 2 months and are nothing untoward or unexpected.

“At an individual model range level there will be those which depart from the pattern by either over or under-performing against the trend and Black Book Live will continue to drill into those details on a daily basis.”

Discover a more accurate way to value used cars with CAP's Black Book Live real-time trade valuations.