When there's no market sentiment
Written by: Ken Brown
How does CAP set its used LCV values?
With so many new LCV models launched over the past year or so and many more to come, you may have wondered how we set their used values in our CAP for Windows product from the day they go on sale and how we set the values in Red Book at a year old when there are often very few, if any, in the used market.
Bearing in mind that the aim of Red Book is to reflect the actual average price that trade buyers are prepared to pay for used LCVs in the used wholesale market, we are also required to set the current plate values of any new models long before they are likely to appear in the used market. This is necessary because there are always some subscribers who need such values, insurance loss adjusters are a typical case in point.
To arrive at a realistic value for a used ‘new’ model on a current plate we take into account the latest plate values of any outgoing models, the prices of competitor models and a premium factor for any enhancements the vehicle manufacturer has made in terms of design and specification. Incidentally, the vehicle manufacturer’s list price isn’t taken into account at all as it seldom bears any relation to the actual prices the trade are prepared to pay for used vehicles at any vehicle age. However, we do take into account vehicle manufacturer sales volume forecasts, anticipated model mix and their general sales strategy should they share this with us.
We also rely heavily on our experience and knowledge of the used markets and how new models tend to perform in their early life as they enter the used market for the first time. This often involves inflating their values for a period of time until a sufficient number of used examples have been sold to establish their true worth – a so-called ‘honeymoon’ period.
The first examples of most new models almost always command a higher used wholesale price but as they progressively appear in the used market their prices usually stabilise and we are able to adjust our guide values accordingly – up or down depending how the market reacts.
We keep a constant eye on the prices that franchised dealers are selling the new models for at all times and we make no apology if it becomes necessary to reduce the used values of any new models during the honeymoon period due to heavier than expected discounting by franchised dealers, otherwise the current plate used values would look unrealistic against the price of new vehicles.
Ken Brown, Red Book Editor - LCVs