Used car transactions only saw a marginal year-on-year fall during the first quarter of the year as the sector adjusted to the impact of economic pressures on buyers.
Used car transactions defied the worst predictions of the gloom mongers during the first quarter with sales just 1.1 per cent down on last year.
While no-one doubts the growing impact of the credit crunch on purchasing decisions –used car sales during the opening three months of the year were just 21,408 short of 2008’s total with nearly 2 million cars changing hands either through retailers or private transactions.
The SMMT figures produced exclusively Motor Trader, show a market oscillating on a monthly basis. While January was around 16,000 units down, February was up by 30,000, followed by a 35,000 shortfall in March.
Q1 auction values
During the quarter used values at auction showed some modest growth, compared with the final quarter of 2007, according to analysis from both BCA and Manheim. BCA’s quarterly Pulse Report showed average fleet and lease car values rose by £116 to £6,688 during Q1 – a rise of 1.7 per cent. On a monthly basis these rose by 4.9 per cent between December and January, although that growth stalled in February with values falling slightly in March. According to BCA average dealer part-exchange values, on vehicles they were disposing of rather than retailing, rose by just £39 over the previous quarter, a climb of 1.6 per cent. Values have been remarkably consistent over recent months, peaking at £2,449 in January. Nearly-new values were lower in Q1 than in the previous quarter, falling by 1 per cent to £15,433.
Values fell in January by 2.3 per cent but recovered in February as average values rose to £16,116 – a 6.5 per cent month on month climb. However, there was an equally steep fall in March to record a six-month low of £14,977.
“This gave further impetus to the view that there is an underlying softness in demand and while Q1 2008 as a whole showed improvement over the previous quarter, prices were in fact under a bit of pressure,” said BCA’s communications director Tony Gannon.
BCA said its year-on-year data suggested that values rose across the board. Average fleet and lease values rose by £281, or 4.3 per cent. Nearly-New values leapt £3,506, or 29 per cent, although this was largely influenced by BCA’s changing model mix and average part-exchange climbed 3.7 per cent to £116. Gannon added that Q2 trends showed the market adjusting to the problem of unsold stock and pressures on price.
“The second quarter looks unlikely to bring much change of the overall picture. Unsold stock remains an issue and there will be more price pressure, as buyers are likely to remain cautious and risk-adverse. That said, good retail quality stock will remain desirable and will continue to outperform the rest of the market – often by a significant margin. We have seen examples of this with very strong results recorded in a number of manufacturer sales over recent weeks,” he said.
Manheim’s Car Market Analysis Report for the period also showed a rise in values with Q1 average values rising by almost 3 per cent to £6,723, a year-on-year rise of 1.2 per cent. According to Manheim the average age of stock in Q1 was unchanged at 38 months whilst the average mileage increased by 1,322 miles to 48,039. Also, the percentage of cost new retained increased marginally from 41.7 per cent to 42.1 per cent. Selling prices did vary depending on the vehicle segment with MPVs showing the greatest increase in Q1 of 8.1 per cent followed by small hatchbacks and 4x4s both of which recorded increases of 5.2 per cent. The medium family segment saw an increase of 2.1 per cent with both large family and compact executive segments showing increases of 0.7 per cent. The executive segment was down by just 0.3 per cent but the supermini segment fell by 6.2 per cent.
Manheim said the volume of vehicles sold during the first quarter rose in line with seasonal expectations to within 1 per cent of the volume sold in the same period of 2007. Mike Pilkington, managing director of Manheim Auctions and Remarketing, warned that following the relatively strong start to the year the market has toughened up during Q2. “Sales on the forecourt are clearly under pressure and the feedback from our retail dealer customers is mixed, with some faring better than others. Trade buyers are certainly becoming more selective and quite a few are just replacing sold stock rather than buying too much speculatively.
“Since April there has been a decline in auction conversion rates but despite this, stock levels are still quite manageable. However, it’s very important that vendors and buyers in the current wholesale market keep it turning over by being realistic about their price expectations. In these conditions it’s also essential to make sure stock is presented properly which includes all the usual attention to documentation and vehicle condition.
Whilst we must all be sensitive to the wider economy, we must also not ‘talk the market down’ unnecessarily. There is still plenty of life in the market and those who keep close to the prevailing conditions and operate accordingly will continue to get the most from it. I think we are probably going to see a prolonged period of tougher trading throughout the year, where the adoption of more aggressive wholesale and retail strategies is going to be key to success.”