Used car values, auction fever and the appreciating asset

Whilst attending one of the many car auctions I get to attend on a weekly basis it was curious to be with the same faces saying the same things and generally experiencing a kind of Groundhog Day. I won’t bore you with the fact that most good low mileage ‘clean’ retailable stock was still fetching multiple bidders and achieving the equivalent of the national debt of a small third world country, the fact is that as trade buyers we got to wondering how these crazy prices were sustainable. Even though it is widely acknowledged that there are now many more private buyers attending the auctions, it could also be suggested that they are getting auction fever in the same way that many trade buyers with deep pockets sometimes do.

As one chap reflected he had seen a small group of chaps feverishly looking around a 3 year old MPV with what he assumed was for cab driving purposes. As the bidding neared its end and there were only these guys and a main dealer buyer left it suddenly became clear that these people had not even bothered researching the purchase on-line or with a dealer, but just assumed it must be cheaper to buy at auction. When the hammer went down the trader remarked that he had a newer car on his pitch for less money than this car made and he would have given them a warranty, tax and a year’s MOT too.

I wondered if this was maybe an isolated incident but then with the amount of private buyers I have personally seen outbidding more regularly these days means it’s probably not. This makes the relevant information we give at MTI more important than ever. The internet, in terms of car marketing and selling, will only keep growing and buyers who want to get the most from their car purchase will need to go on line to do this. If they don’t they will not be able to get a real feel, other than gut instinct, for whether the car or the deal they are buying is the right one.

I was speaking to a guy who has dealt in the luxury end of the 4wd market for many years who told me of a deal that probably epitomises the great change around in used car values this year. Back in March he bought a 1 year old Volkswagen Touareg, which is a large 4wd introduced by VW in partnership with Porsche around 2003. This particular model was the top spec version and he bought it for about £22,000 and sold it on for around £25,000, all fairly normal and straightforward. So last week he gets a call from a Jaguar dealer who offers him a Touareg similar to the one he has just described, and needing this kind of low mileage stock he bid £26,500 and this bid enabled the Jag dealer to do the deal.

They rang my colleague told him to come and pick up the car, which he did thus discovering that this was the same car he sold earlier with a few thousand more miles and clearly a few thousand pounds more expensive. The customer probably nearly fell over on realising that his big depreciating gas guzzling 4wd had actually made him £1,500 profit and the trade price of that car had increased by £4,500 in little over 4 months.

Unfortunately for the customer it is all relative and he probably paid a similar amount more for his new car negating the good news, but a real life example of the spectacular reverse in UK used car values and of that one time extremely rare commodity, the appreciating car.

When will it end? Well with the prices paid by the likes of our three friends at the auction the phenomonen of the car as an appreciating asset may be very short lived indeed.