Prices for used cars have stabilised, and there is now the prospect of falls in values during the final quarter of the year, according to the valuation team at Glass’s. Tighter margins, the influx of September ‘plate-change’ trade-ins, and the onset of a quieter sales period have contributed to the halt in trade price rises, following an increase of 30 per cent for mainstream models during the last twelve months.
While prices have fluctuated with the seasons in 2009, the nature of the shifts is without parallel this century. The early spring peak in price rises was particularly exaggerated, and even the seasonal decline normally associated with the quiet summer months was replaced by further price hikes.
Adrian Rushmore, Managing Editor at Glass’s, comments, “The improvement in prices this year was largely due to the much lower level of used-car supply. It is apparent that the correction is complete – in other words, the trade price of a car, plus a dealer margin, now equals the retail price that customers are willing to pay. However, there are already signs that some dealers are displaying vehicles with smaller margins in order to ensure that would-be buyers are not discouraged by price.”
Dealers have reported concerns that retail sales are likely to slow from early October. “They will have paid very high prices for their stock and will be mindful that, if retail pricing action becomes necessary, they will be further reducing already-tight margins,” says Rushmore.
The increase in used-car supply generated by sales of the ’59’-plate will be relatively small compared to recent September plate changes. All the same, Rushmore observes, “The balance of power may be starting to shift from seller to buyer. The market is not set to destabilise, but there is now the threat of price falls for the first time this year.”
In a typical year Glass’s would record a fall of seven to eight per cent during the final quarter. “Though a decline is likely in the closing months of 2009, we expect it to be between two and four per cent – some way below the ‘regular’ trend,” according to Rushmore.
Warning trade vendors to stay alert to the changing market, he says, “We are entering a more testing period of used-car trading, so vendors must read market conditions and react to whatever level of price the market moves to. If we are about to see the imminent arrival of fleet cars from extended contracts, vendors must recognise that high-mileage cars in need of refurbishment are not favoured by trade buyers in a less active market. Past experience has demonstrated that the rejection of realistic auction bids merely leads to lower bids at future sales. It is no one’s interest to create a downward spiral of prices.”