LCV market commentary

Apart from the UK economy narrowly escaping recession this time, as we enter June many of the market conditions affecting the values of used LCVs are very similar to those seen during the same period last year. Generally the vehicles being entered for sale are older, with higher recorded mileages and many are exhibiting extensive body panel damage.

Paradoxically, our research data reveals that there was a significant downward shift in market prices last month, whilst demand remained relatively high. We saw the strength of demand for ourselves, in the process of researching at auction sales, where many traders were buying for stock.

The market continues to suffer from a shortage of stock, limited model mix and duplication bordering on over-supply of certain models.

With economic growth in the doldrums, this can hardly be attributed to business expansion and the majority of sales are therefore more likely to stem from the natural underlying demand from operators replacing their existing vehicles. Although some dealers reported a slight improvement in sales last month, generally the retail market for used LCVs remains depressed. According to some dealers, the continuing unwillingness of the banks to provide vehicle finance is still hindering sales. Therefore it can be argued that the older less expensive vehicles we are currently seeing in the marketplace offer a more affordable solution, which could go some way to explaining the high levels of interest.

However vehicles are sitting on sales forecourts longer and their holding cost is not only crucial to dealer profitability but also has a huge impact on the overall level of wholesale demand. As there is a limit to the amount of stock they can hold, the time it takes dealers to sell their existing stock will continue to affect the wholesale market dynamic.

Unlike the franchised dealer groups, independent dealers do not have the luxury of being able to move ageing stock to other sites for a fresh start, so we can also expect more vehicles re-entering the wholesale arena as unsold stock is traded out again.

Therefore, going forward, we are expecting the level of wholesale demand to fluctuate according to the balance between retail demand and the supply of desirable stock.

This may well result in more of the yo-yo market price effect over the coming months, such as those we have already seen on models such as Transporter T5 and some of the 4x4 Lifestyle Pick-ups.