Motorists face higher used car prices as dealers pay rising wholesale values, says CAP

MOTORISTS may have to pay more for used cars in the coming weeks as independent used car dealers struggle with rising wholesale values, according independent car information experts, CAP Automotive.

Despite an overall increase in the supply of used cars into the market, the best quality examples are hard to come by – and competition is pushing trade values up.

December 2013 saw a 20% increase in the number of dealers reporting difficulty in acquiring suitable stock, compared with the previous month.

The problem is in stark contrast to the market picture 12 months previously when the majority of dealers were easily able to find all the cars they needed.

CAP has already reported that it expects values to increase over the coming weeks for those cars that can be most easily and quickly prepared for retail sale.

Each month CAP questions a ‘Dealer Insight Panel’ of around 100 independent used car retailers. It is part of the research for Black Book Live, CAP Automotive’s unique real time used car trade values trending tool, used by businesses across the industry.

This research also feeds into CAP’s unique Total Cost of Motoring tool, which reveals the true price of car ownership over time, by providing CAP experts with vital data on market conditions.

The latest dealer survey results show only 7% of independents describing the business climate before Christmas as ‘good’, compared with 30% who said it was ‘poor’.

Looking ahead to the next few months 36% thought conditions would improve slightly, but none believed there would be a significant easing of supply challenges.

Mike Hind of CAP Automotive said: “Although the trade market has got off to a flying start in January, with strong demand for the best quality cars, this represents a real challenge to dealers.

“The problem isn’t lack of retail demand, despite the inevitable slowdown in sales we saw as the winter progressed, because dealers are used to the cyclical nature of the market. The real issue is managing to meet demand with the return of business as usual.

“Nor is there a problem with stock availability overall. The volume of cars in the trade market has been growing slightly ahead of expectations in recent weeks, but the majority of these cars would not be most dealers’ first choice because they require significant investment of time and money to prepare for retail.

“But if they are going to keep up with demand, they will either have to spend more money up-front by competing hard to acquire retail-ready cars, or they will have to settle for what’s easily available and spend more money on preparation.

“Either way, we can expect to see prices rising on the forecourt wherever dealers are unable to absorb these extra costs by reducing their profit margins.”