Underlying nervousness affecting the car market

As car makers push for more registrations, pressure is likely to fall on late plate used cars as big incentives are given to franchised dealers to offer customers massive savings on new cars.

The effect of is used car buyers become new car buyers and the older used cars which dealers look to sell to fill the void ultimately become more in-demand and as a result attract a higher price.

The cars which are economical to run and cheap to insure and maintain have been achieving good money on the wholesale market, whereas big engine petrol and larger 4wd’s have recently seen their values drop like stones as a result of the crippling price rises on fuel and general economic gloom and uncertainty.

Many buyers are going into showrooms and not asking about which car they are interested in but instead what car has the best consumption figures which may fit their budget. In other words many buyers are now forsaking the aesthetics and looking for practicality and long term value.

Most manufacturers will have cars in the model line up which will appeal to a cross section of buyers – and therefore the smaller hatchbacks and family cars are selling reasonably well – but in which the profit margins are generally lower.

The first quarter for new cars has been fairly successful in terms of volumes and, although likely to be lower year-on-year, if you take out the scrappage effect then the market appears to be recovering well and could be even more buoyant if supply issues weren’t so acute.

There is however and underlying nervousness in the market with many cars not being sold at auction as an influx of late March part-exchanges are dumped on the market giving the trade buyer lots of choice. This means cars that miss the boat or have not been correctly valued to the changing market conditions are not making their reserve.

It is perhaps a great time for the private buyer who is prepared to go to an auction to pick up a bit of a bargain right now as April, with so many bank holidays, is likely to see cars piling up with less buyers to bid on them leading to vendors having to seriously re-adjust their price expectations to keep turning the metal.

So if buyers have money to spend April will probably as good a month as any other this year in which to spend it in as dealers look to maximise every opportunity to sell to what’s likely to be fewer customers.

Although the long term situation points towards an undersupply of used cars, price depreciation is likely to be more of a factor than perhaps it has been for the last couple of years certainly in the short term.