DEMAND for retail used cars in the trade and on the forecourt continues to keep pace with rising supply, according to the latest market commentary from CAP.

But the disproportionately high number of poor condition cars means caution should be the watchword in this area of the market.

And there are continuing signs that strong financial incentives designed to drive new car sales mean late plate values are also under greater downward pressure than the core three-to-four-year-old market sector.

The latest market insights are published in Black Book Live, CAP’s unique real-time used car trade values trending guide.

Although some industry observers have voiced concerns about the ongoing increase in private registrations, CAP believes that it has reduced the incentive for some manufacturers to pursue large daily rental deals.

Historically, large daily rental deals have influenced used values because rental cars can reappear in the used market a few months after registration. This has, in the past, caused issues where supply is not necessarily matched by demand, resulting in pressure on prices.

Black Book Live notes that overall rental volumes are down, compared with the same point last year, and suggests that they pose no threat to overall price stability as long as short term peaks in supply are not cleared by distress marketing.

September is expected to bring more retail car dealers into the auctions than is usual for a new registration month. This is because many consumers are choosing to sell their cars via specialist online buying services before buying their new vehicle, rather than trade them in as part of the deal.  Many dealers are consequently expected to actively seek the kind of stock they would usually have taken in part exchange.

CAP sounds its main cautionary note on the growing number of low quality cars entering the market.

Black Book Live senior editor Derren Martin said: “This tends to be a feature of the auction market at this time of year, but this year, the volumes are a little higher.  This also means that there will be a greater carry-over into September to coincide with the influx of cars generated from the new registration plate. Given this situation, price expectations will need to be tempered for these poorer condition cars.”

Black Book Live valuations have continued the trend identified last month, with smaller downward movements than at the same point in 2013 and some cars slightly increasing in value over recent weeks.

Derren Martin said: “In general the market picture is positive.  Overall rental volumes are down slightly on this time last year, further supporting our comfort around late used values.

“Generally the main auctions were achieving some way in excess of 70% conversion rates toward the end of August and demand from buyers for good quality, ready-to-retail cars remains strong, resulting in some models recently seeing values rise slightly. 

“Used values continued to hold well in August, as demand for stock by retailers remained healthy.  The picture as we move into September is certainly not dissimilar to this point last year, with early strengthening in the SUV market in particular, as dealers acquire stock in anticipation of a rising market.

“For the mainstream sectors, where condition is between average and good, price stability is likely to prevail, at least during the first half of the month. Prices on late plate cars continue to experience slightly more pressure than older cars, as incentives and dealer contributions from the manufacturers encourage consumers to buy new.

“But overall, the Black Book Live negative adjustments applied in recent weeks have been modest –  generally less than one per cent – which is a slightly stronger performance than at this point last year. 

“Tactical registrations will be an inevitable feature of the market at the end of this month, but much depends on whether the high expectations of manufacturers are met with genuine orders. For all other areas of the market, the used car supply is expected to be plentiful but retail demand is also expected to be high. This should translate into supply and demand being well matched, at least until we move into early October.”

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