New Car Sales
The SMMT reported that UK new car registrations rose 14.8% in April compared to April last year and 8.9% for the first four months of 2013 compared to the same period in 2012. This is the strongest growth in 14 months driven largely by private registrations (up almost a third on last year), a result of competitive new car pricing activity, including attractive finance offers.
Strong new car sales activity continued into May – many manufacturers having rolled over sales campaigns from Q1.
Daily Rental registrations are also up year-on-year, by some 14% at the time of writing; a number of premium brands continue to have a strong presence in this area. The usual mainstream players are also still in this market, with notable registration activity. For some though, this year-on-year increase is a production bottle-neck issue and is expected to even itself out over the coming months.
Auction Activity
The major auction houses are reporting both conversion rates and performance are down compared to last month. Conversion rates vary depending on the auction, but on average they are a few per cent lower than the 65% we reported last month. Due to strong new car activity, higher volumes of part exchanges have satisfied dealers stocking requirements and this has reduced the need to source stock from auctions. Over 70% of the vendors we have spoken to in recent weeks reported that both conversion rates and performance are either level or down in May compared to the previous month. When looking at the picture since March however, conversion rates have dropped 12%.
Poor quality, older, high mileage cars continue to create a ‘drag’ on the market. There has been a reluctance to take what vendors see as unacceptably low bids and buyers have become more fastidious with their purchases. However, we have seen throughout the last month an increasing desire by some vendors to get the stock moving with the grudging acceptance any price recovery is not imminent. Whilst in the short-term this has adversely affected values, once the volume has gone there are not great quantities in the pipeline.
Used Cars - Trade Values
Following on from values falling through April, a similar pattern has been apparent in May. The price stability witnessed during the first 3 months of 2013 has been replaced by price erosion, but the market has not gone into free fall. Values have continued to drop, but on average no more than would reasonably be expected at this time of year. One noticeable aspect however, is that older cars have depreciated more in percentage terms than newer cars. The main reason being that the expanding new retail market has generated greater numbers of older part exchanges.
However, the theme remains of a lack of good quality, ready to retail cars. When these are located, strong prices are generally paid in relation to CAP Clean. It is the higher mileage, poor quality offerings that adversely affect the market with price weakness to match.
Used Cars – Retail
Smaller independents appear to be challenged more by the recent trading conditions. Not only are they struggling to locate desirable stock because there remains a shortage of good quality three year old cars but the attractiveness of new car offers are attracting customers to new cars instead of to their forecourts.
What Next?
Increased stock levels that have been apparent since March are slowly coming down; a number of remarketers have reported that their short-term spike is over; this can only aid used values. Vendors are also realising that they have to accept bids on poorer quality offerings reducing what is on offer in the market.
Values have dropped going into June, but much of this adjustment was highlighted in Black Book Live in the early part of May. Later in the month there was more stability, a likely positive signal. If, as expected, stock levels continue to decline, we would not expect anything other than slight negative seasonal adjustments during the next few weeks.
Black Book Live will continue to report valuation movements as and when they happen, rather than waiting for the following month to advise what occurred.
Derren Martin - Senior Editor Black Book
derren.martin@cap.co.uk
