I have attended several auction sales in the last week more as an observer than a buyer, just to receive a reality check and see things at first hand. Are used cars increasing in value to the extent that we keep being told? If my experiences are anything to go by then that’s a resounding yes! You can’t help but notice the smug look on the faces of the auctioneers and counter staff as yet another sale is concluded with a near 100% conversion rate. The first thing that grabs you is the distinct lack of cars. Pre-Christmas there were so many cars either un-sold or fresh to the line-up that “buyers-market” wouldn’t begin to cover it, yet now there was half that amount and at least one auction I visited only had one of its 3 lanes in operation.
The other thing you can’t help noticing is the sheer volume of people. Whereas in years gone by the split between trade and private buyers would be in the region of 80-20 in favour of the trade it is now very much closer judging by the all the parkers guides on display! The other point of note was that even cars which wouldn’t make the grade for most dealers were still achieving more than 100% CAP clean.
The consensus in the trade at present is that the small economical cars are the best sellers and the most profitable but really just about anything with 4 wheels seemed to have a willing buyer or two. If anything the sales were taking half an hour longer than usual due to the number of people making bids, thus ensuring the auctioneer needed eyes in the back of his head to see all the eyes twitching and catalogues waving. The obvious suspects such as Corsas, Polos, Minis, Fiestas, 206’s and the like were all making hundreds more than I certainly thought they were worth but then that is the beauty of an auction; i.e. they are worth what somebody is willing to pay. But aside from the smaller cars sportier models such as BMW’s, Saab’s, Audi cabs, Merc’s and nearly all the 4wds were making what we call “Brewsters” (millions) as in the film starring Richard Prior!
As demand quickly outstrips supply and with private buyers – certainly the buyers I saw – seeming to be “recession adverse” I wonder when the situation will change. There certainly doesn’t seem to be the volume of cars out there at present and if the dealers who continue to pay these prices (and who presumably remain confident that they can pass these increases on to their own customers) keep selling then prices will keep rising. At some point someone will have to say enough is enough and those who have carried on stocking their forecourts in this kamikaze style may find it difficult to make a profit if suddenly prices ease and buyers look to new cars again.
We are certainly living in interesting times and judging by the amount of private buyers I observed on my travels the auction houses have obviously improved the quality of their operations. It must have improved to such an extent that these private buyers now feel confident enough to cut out the middle man and deal direct with the same source of cars that the trade buys.
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