CAP Gold Book highlights the disappearing uplift in 4x4 values last winter

ANALYSIS of SUV residual value performance by CAP Gold Book forecasting experts has revealed that the expected winter uplift never took place this time around.

According to Gold Book, 4x4’s came out of the winter in a lower-than-expected residual value position – then reverted to a normal seasonal pattern of reductions in recent weeks.

The result was a lower-than-expected position for SUV values during April, caused by normal seasonal 4x4 value attrition starting from a lower base than usual.

It was revealed in analysis of differing seasonal patterns among car sectors for CAP Gold Book iQ, which reveals forecast assumptions underpinning all future residual value predictions.

The UK used car market displays distinct seasonal patterns, linked to natural fluctuations in supply and demand but Gold Book’s deeper and more granular approach to forecasting differentiates between sector and fuel type to reveal the nuances within overall market performance.

SUV seasonality usually displays a markedly different trend in comparison with the rest of the market, with shallower depreciation in the winter months followed by greater falls during Spring and Summer.

But last winter saw little or none of the usual uplift in 4x4 values.

Gold Book senior editor, Dylan Setterfield, said: “There has been much comment in recent weeks around reductions in used values for SUVs and the fact that they were falling faster than other types of vehicles.

“Some of this was due to the natural tendency among those involved in buying and selling vehicles to focus on recent history – how good is this week or month compared to the previous one?

“When values started to fall this year after Easter it sparked speculation that the SUV market was a bubble which was starting to burst, when in fact the reductions observed during April were in line with expectations.

“However, during the course of our routine sector analysis, measuring actual used value performance relative to seasonal expectations since our review in November, we saw a significant departure. In the SUV sector, values were on average 4.5% lower than we would have expected from typical seasonality movements.

“We had already forecast in November for a slightly weaker seasonal upturn, so the outcome is that values are on average only 2.5% behind our forecast.

“The weakness in SUV values was not a sudden fall and was traced back to a lack of strength earlier in 2014. 

“The overall message the market should take on recent 4x4 residual value changes is therefore that they are now returning to something much closer to the normal seasonal pattern following an unusual winter period.”

Setterfield also warned that while the SUV sector as a whole is expected to conform to seasonal expectations this year, individual models which have seen large volume increases will see a much harder landing.

He stressed that SUV’s were not losing popularity but emphasised that for certain models used values over the past year had generally been shored up by limited supply.

He said: “We expect supply, in some cases, to increase considerably over the next forecast period as previously strong leasing registrations return to the used market. As a result, used values for certain sub-sectors are set to decrease considerably over the next few years as the patterns of supply and demand start to change although for the majority of models the future remains fairly positive.”

Dylan Setterfield - senior editor, CAP Gold Book and Gold Book iQ