Part-ex prices crucial for profit says auction boss
- June 10, 2019
- Posted by: John Swift
- Category: Automotive Industry
Used car valuations could be heading for their biggest drop in a decade this month and dealers are being advised not to pay over the odds for part exchange and then plan to recoup their money at auction.
Andy Conde, of Manheim Auctions, says that cars which were force-fed through the new car sector by dealer pre-registrations over the past few years have artificially inflated supply just as the Brexit uncertainty has begun to put the brakes on consumer demand.
More vehicles are taking longer to sell as a result with some being returned to auction several times before finding a buyer but for a much-reduced price and that values will inevitably adjust to reflect the current market.
He said: “The past few months have been somewhat turbulent in the auction arena with a fall in buyer demand but an increase in stock supply. This ultimately means a fall in auction conversion rates and prices. We are seeing many vehicles re-entered into auction multiple times because vendors have refused the first bid, eventually taking considerably less in the third or fourth sale. We are now going to see a further drop in Cap prices of around 3% from May to June – this will be the biggest reduction since 2009.”
Andy added: “The auctions cannot be relied on to make the dealers’ profit. Everyone is competing for the same deal, and the danger is that over-paying for a part-ex in the hope of the auction bailing you out is just not going to happen in the current climate.”
Dealers facing ‘a perfect storm’
Market analysts are split over precisely how values are responding to the current trading conditions with some talking the market up and others taking a slightly more negative view.
While there have been winners and losers among the market sectors and various models within them, Cap HPI spoke of ‘a perfect storm’ facing dealers handling stock that went through price increases a couple of years ago but which they are now trying to sell in a climate of weakening demand. On the other hand, Cazana says there is no evidence for a general fall in values over recent months and that in fact, 18-plate nearly new cars have actually gone up.
Last month the SMMT released data showing the Q1 used car market remained broadly stable with a year-on-year drop of just 6% and more than 2 million sales. While diesel has taken a battering, internal combustion engined cars still took more than 98% of the January-March market.