DIPPING used car trade values during early April have led to a warning from CAP that the May edition of its monthly Black book will see a slightly larger fall than a year ago.
The move follows a market downturn which began shortly after the traditional monthly edition of Black Book for April was published.
CAP took the rare step of signalling that its April book valuations were rapidly overtaken by a dipping market trend to highlight the risks associated with reliance on a traditional monthly price guide.
The company believes that apparently sudden price guide movements – which are inevitable when a fluid market is only reported monthly – can cause unnecessary alarm and potentially damage confidence.
CAP also argues that monthly price guides can interrupt the flow of business by failing to reveal profit opportunities - or chances to avoid losses - in a timely way.
For example, vendors relying on fixed monthly valuations in April could have sold cars more quickly had they accessed real time valuations that showed values falling, rather than holding out for prices the market would no longer bear.
Similarly, buyers would also have known that cars were becoming more affordable sooner, presenting opportunities to beat competitors in the hunt for specific stock.
This month’s price falls have been the natural result of a bumper new car March, leading to increased supply which has reduced general demand from dealers who are now retailing their way out of part-exchange cars rather than actively seeking fresh stock.
Taking the period between April 1 and April 17, overall sector average downward movements, at 3yr/60k, ranged from 2.6% for City Car and SUV - the vehicles under most pressure - to between 1.6% and 1.8% for most other mainstream sectors. Convertibles, Coupe Cabriolets, Luxury Executive and Supercars saw rises of between 0.1% and 0.7%.
For most mainstream cars the increase in supply, coupled with a reduction in demand has begun to undermine the unusually robust market that has characterised the past year.
However, because the market turn began after publication of the April edition, it means the May Black Book will see values adjusted downward more sharply than if the market had begun to move a few days earlier.
CAP's announcement of an impending May 'book drop' highlights the growing difference in relevance between ‘live’ market value reporting and the ‘artificial snapshot’ approach of a monthly price guide.
Black Book Live, CAP’s ‘real time’ trade valuation tool was launched in 2012 to solve the problem of playing ‘catch up’ whenever significant market movements began shortly after the publication of a monthly guide.
The problem for monthly guide producers – and their customers – was highlighted most starkly in 2008, when the used car trade market began to plummet shortly after publication of the April Black Book. CAP later admitted that Black Book remained ‘behind the curve’ for much of the rest of that year.
Again, in 2009, when a meteoric market recovery saw prices rapidly increase, Black Book consistently under-reported trade values until stability returned.
Derren Martin, senior editor of Black Book Live, said: “The market has not gone into freefall, but customers of the monthly Black Book will certainly be seeing one of the most significant price reductions in the May edition for several years.
“Black Book Live has been reporting reducing prices on a daily basis since the market began to turn shortly after we completed the market ‘snapshot’ required for the monthly version of Black Book.
“This is exactly the scenario that we introduced Black Book Live to address because customers of our real time product have not been alarmed by what is merely the inevitable fall-out from such a strong March, following a long period of stability.
“However, monthly Black Book users who have grown used to a relatively tranquil market for quite some time may well find the May edition comes as something of a shock.
“That is the nature of the beast when you attempt to reflect a moving market by taking just 12 measuring points over the course of a year.
“The message for those who prefer a traditional price guide is – better hope that it was sent to the printers after the market changed, or you’ll always be behind the market curve.”