Used car market so hard to call

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Sometimes it is difficult to reach a common consensus of opinion, as the current political situation tells us and in the motor trade there has never really been a situation like we are experiencing right now, with so many differing opinions on how to call the market.

For example some of our sources tell us that certain cars are going through auction and making ‘brewsters’ (as in millions) more than the consensus opinion of what they are worth, and not necessarily unique cars either. Cars which are not run of the mill in terms of colour or specification are making a real premium as are exceptionally low mileage examples.

At the same time the ‘cheapy’ sector, which is normally buoyant during a recession especially with people who view car ownership as something of a functional necessity rather than a kind of lifestyle choice, is struggling.
That said it also seems to be a very regional thing, we know a chap who is responsible for stock management across 10 branches between the Midlands and the North of England who tells us the difference in performance could not be more marked. Some are having a great time while others are pulling their hair out.

The situation regarding new cars and the real effect of the end of scrappage should become more apparent come the end of May; however dealers are telling us that showroom traffic on new cars has declined by as much as 50% in some showrooms. Buyers seem to have reverted back to buying late plate used or demo examples in the belief that they are getting a better deal and safe in the knowledge they can have the car almost immediately.

The interesting aspect at present is that cars really are finding their own values and buyers are not being fooled into paying over the top for cars, even though dealers are having to pay top dollar in the wholesale market.

In a similar way to last year when used car values rose steadily, dealers are finding that although they are paying top trade prices and stock is in high demand they cannot transfer those higher prices onto car buyers and thereby have to settle for lower margins as a result.

The other dynamic in play is that although buyers will not necessarily pay a premium for an average car (and, of course why should they?); the range of profitable products being sold to them ensures that each car sold can ‘earn its keep’ so to speak.

As we often say the future will be very much driven by how each car can generate income for a dealer without relying solely on what the car itself makes and as long as the whole package represents value for money to customers (perceived or otherwise) it is not a bad thing.

From the point of view of a customer considering a change, if you do own a vehicle which fits into the categories which are “hot”, i.e. low mileage, unusual colour, premium spec and a desirable model it will be prudent to explore all avenues when parting with it because it will almost certainly have a huge selling margin across it if you don’t.