The Gavel - October 2020
Wholesale market opinion from our resident car and LCV auction experts, Andy Conde and Stuart Peak.
Andy Conde - Cars
Amongst the threat of rising Covid-19 cases and regional lockdowns, which will undoubtedly be a cause for concern for business owners in many sectors, I count my lucky stars that we all get to work in this industry which continues to surpass all expectations.
The used car market remains remarkably strong all things considered, particularly auctions which despite a slight easing in demand continue to put in strong numbers. September new car registrations also continue to rise, albeit slightly lower than last year which isn’t surprising for obvious reasons.
Of course, the automotive industry isn’t immune to the impact of the virus and any changes to the current Covid guidelines will impact car dealerships as well. Local lockdowns mean that any pain caused won’t be evenly spread across the whole market, but the resilience shown by our industry throughout the year has been nothing short of remarkable and gives us all a reason to be hopeful for the coming months.
To give you an idea of the strength of the auction market compared to last year, our average conversion rates are currently 15% higher and CAP performance is 5% better. If you read any of my blogs from last year, you’ll see I was singing the praises of how the market was performing, so that should give you an idea on just how good the current performance is.
Attendances have also increased once again – online of course – as more and more dealers look to keep their forecourts filled, in part caused by a lack of part-exchanges coming in. This has ultimately meant that demand continues to outweigh supply because part-exchanges make up a large portion of vehicles that go through our, currently virtual, auction lanes.
There is no doubt in my mind that the gap between clean, retail-ready cars and those that require refurbishment is widening and I encourage all vendors to take this into account when setting reserves. My mantra of the first bid often being the best bid certainly rings truer with these less desirable cars.
Amazingly, the luxury car market is as buoyant as I can remember with the values being achieved at auction being reflected in the latest guides. Also surprising is that we are still seeing strong demand for export product in Europe and beyond despite the many travel restrictions in place around the world. Prices have followed suit, with those vehicles that are suitable for overseas markets realising well in excess of even the most enthusiastic of valuations.
As we head into winter, I truly hope the current trends will continue because a strong wholesale market gives confidence to the dealers on the front line. But as I have said before, we will approach the rest of the year with caution and always do the right thing for our customers and team members.
Stuart Peak - LCVs
When I sit down to write this monthly blog, I look at the data anticipating that the market cannot possibly get any stronger. But for the fifth month in a row, incredibly it has.
It only takes a brief look the headline figures to see what I mean. Average selling prices have increased £232 versus a record August to a new high of £8,390. Sales price versus CAP average has increased another 1% to 108% - remarkable considering that there was a 3% average CAP value increase going into September.
Every day I am asked, “Is the market sustainable?”. Of course it’s hard to predict these things, especially considering the volatility of the world we currently live in, but my gut feeling is that whilst the huge LCV demand continues and supply remains short, it is sustainable for at least the short to medium term.
There simply hasn’t been a better time to sell a used LCV. Wholesale records are being smashed month-on-month and the vast majority of dealers I’ve spoken to are enjoying a very buoyant retail market and healthy profits.
Another question I am frequently asked is, “Where is all the stock?”. All the large corporate rental companies are seeing a real shortage of supply at the moment as rental demand is so high, clearly driven by a rise in home delivery services we’ve seen this year. In fact, we are seeing some vans from such companies being pulled out of our auctions to be re-fleeted to meet the demand – a trend that could increase in the coming weeks, particularly in the lead up to Christmas as more vans are needed on the roads.
Lead times for many manufacturers are still longer than they would usually be, and I also don’t see this changing any time soon.
Euro 6 vans continue to see high demand, but there was a 4% drop in the number of these vehicles available, representing 39% of all the vehicles sold in September. Average Euro 6 prices did rise by £728 however, again proving that a shortage of supply will help drive values up.
It’s encouraging to see that our buyers continue to embrace our online-only auctions and attendance remains high across all our LCV events. Some car buyers are even dabbling with the auctions, particularly in the 4x4 and lifestyle sectors.
Franchised dealers have been busy at auction in recent times and are clearly seeing the benefits of stocking used LCVs. 13% of all stock sold was to a franchised dealer, who clearly favour newer and lower mileage units however there have been pockets of interest in vans up to 5 years old and in excess of 80,000 miles.
Looking ahead to October, the guides have reacted once again to the strength of the market with a further 4% CAP increase. In my opinion, those vendors that react to the changes the quickest will reap the rewards. We could start to see the market fall back in line, with those large CAP percentages falling a touch in October. By that I mean that auctions with CAP figures of 110%+ won’t be as commonplace, but as we all know, anything is possible in the LCV world.