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CAP: outlook for the used light CV market

  • 14 December 2011
  • By James Clark

Tim Cattlin, Editor at CAP Monitor Commercial Vehicle, writes:

It goes without saying that 2011 has been an interesting year in the used light commercials market. Of course, the story really begins in 2008 when new registrations faltered, before going into freefall. That inevitably created a shortfall in the usual levels of used stock three years down the line, which we saw this year, albeit with not as severe an impact as we might have expected.

The first unexpected supply story this year was the increase in supply in the early months, following a series of significant businesses exiting the market including Rok group, Leaseway, Newtown, Connaught and TLS. Prices then inevitably softened in response to the increased volume in the open marketplace. This situation was only reversed in the summer when volume dried up to a large extent, leading to stronger values. But in the autumn there was a strong sense in the trade that higher trade values were not sustainable due to weakness on the retail side and buyers were increasingly prepared to walk away from damaged vehicles or move on if their initial bids were not accepted.

Weakening prices

Our research data indicated that overall prices being realised peaked in the closing days of October and early November and since then have been weakening slightly. Vendors are reporting that conversion rates have slipped. Traders are suggesting that, although restricted for choice, retail buyers are crying ‘enough is enough’ and prices have reached a point which they are unwilling to pay and stock is staying on the forecourt.

We’re also seeing evidence that the quantity of entries at auction is fluctuating. The reduction in the quantity of vehicles being offered we saw in the first few weeks of autumn is no longer uniform across the country and in some weeks the level of entries has been quite buoyant. The thought is that maybe as conversion rates have slipped, the same vehicles are being re-entered into the following week’s sale, or at an alternative centre.

Uneasy balance

Having set the scene, what does the immediate future hold? The view of CAP Monitor is that next year will see an uneasy balance of supply and demand. With the potential bonus of an Olympic-related feel good factor, provided there are no more unforeseen shocks, we anticipate used LCV values to remain broadly in line with those measured in late 2011.

After that we are expecting the situation to continue improving in 2013. Cautious optimism about the economy should by then be on the rise and the used market will be stimulated by businesses unable to postpone vehicle replacement any longer. With more buyers chasing stock which is still scarce, values should remain above the long-term trend. It will be in 2014 that prices begin to stabilise and return to the more familiar pattern because supply will be starting to increase by this point.

In summary, we are anticipating some difficult times ahead but the choke on supply will prevent any kind of values meltdown. It is only to be hoped that the supply picture will not change dramatically due to further business failures because that would threaten the fragile balance of supply and demand that we currently foresee.


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