The Gavel - September 2020
Wholesale market opinion from our resident auction experts, Andy Conde and Stuart Peak.
Andy Conde - Cars
The strength of the market and sheer scale of buyer demand has been widely reported since auctions resumed in May, and as I step back and assess the month of August, it’s fair to say this has been the busiest August I can recall for both sales conversions and prices.
Demand remains extremely high for all retail-ready stock, with buyers happy to throw away the guidebooks in favour of their own intuition. In times like these, their real-world knowledge of the difference between the buying price and what they can retail a vehicle for has proven more effective than relying on guide prices.
Looking further afield and it seems September is set to be a stellar month for the industry, with forecasts predicting we could see record numbers of new cars sold with the release of the 70 plate. All of this is great news, but one has to wonder how many people will be put off by the long delivery times?
In terms of the effect this will have on the wholesale market, high new car sales historically mean an increase in used car volumes entering auctions, which could lead to lessened demand and an easing in prices. However, my view is that many dealers will be looking to keep as many of the part-exchanges as possible rather than auctioning them due to the prices that can currently be made at retail.
The change in buyer activity since lockdown continues to astound me and has enabled online auctions to go from strength to strength. Since auctions restarted in May, Manheim has seen over 1,000 buyers logging in to an auction online for the first time. Out of all online attendees, over half have doubled the number of vehicles they usually purchase between May and August.
Auction attendance is up over 40% compared to pre-lockdown numbers, and a half of previously physical-only buyers have now purchased online.
Many of our valued customers who have been with us for a long time were initially cautious to the idea of buying auction vehicles online, but most have since come around after experiencing the many benefits. Just last week, whilst talking to someone who had vowed never to buy a vehicle online, he confessed to me that he was really enjoying the online experience as he was able to cover numerous auctions in a day rather than being sat in his car stuck in a traffic jam.
Overall, prices in the wholesale market remain very strong and dealer confidence is sky-high thanks to steady retail footfall. As a result, many Manheim auctions are regularly exceeding 80% conversions. Manufacturer auctions are performing particularly well with the majority seeing 100% conversions as buyers battle for the highest quality used stock available.
Looking ahead to the Autumn months, September usually lacks units and sees high prices. Early indications are that this year will be no different, but keep in mind that there could be an influx of stock later in Autumn if September does prove to be a record month for new cars. As the government’s furlough scheme comes to an end in October, we may see a different story, but for now it’s business as usual.
Stuart Peak - LCVs
Looking back at how the market moved in July, it was clear that we could expect the volume of de-fleeted LCV to reduce and a touch of normality to set in throughout August. Whilst we have seen both at times, all told, August was a superb month at Manheim.
Average selling prices in August increased by £59 versus a record-breaking July, up to £8,158. And whilst we saw a record 8% average increase in CAP values heading into the month – an increase of the likes we’ve not seen before - our sales performance vs CAP Average increased marginally up to 107.13% for the month. This was despite a marginal rise in the average age of all stock sold (0.3 months) and a slight decrease in average mileage (567 fewer miles).
The minibus sector saw CAP pricing realignment heading into August and it was pleasing to see increased demand for these vehicles as a result. Whilst sales prices are still often considerably behind CAP values, further reductions going into September should help. Coupled with increased activity at our auctions, we should see this sector recover to pre-lockdown levels.
Euro 6 vans continue to be popular with 43% of all vans sold throughout August being within this age bracket. Average prices for Euro 6 also increased £223 to £11,412. Compared to the start of the year when average prices for Euro 6 were below £10,000, this highlights how buoyant the used LCV market has been since returning from lockdown.
And it’s not just Euro 6 performing well at auction. Within the Euro 5 bracket, average selling prices again increased to £5,758 in August against a record-breaking July.
Whilst buyer demand is still there, I think it’s fair to say that we have had to work a little harder on the rostrums throughout the month at times. Those vendors that have recognised the large increases in CAP values and adjusted prices accordingly have fared best.
Despite this, first-time auction conversion rates at Manheim were very healthy throughout August with only a marginal decrease of 1.1% versus July – not a massive surprise considering August is usually prime holiday season for the industry. Whilst most of the country may not have gone abroad this year, many have taken time off to spend with their families throughout the school holiday period.
Retail activity seems consistent in August, perhaps a touch slower compared to July, but the dealers I’ve spoken to certainly aren’t complaining. As a result, my phone continues to ring off the hook with buyers asking where the stock is, a sign of the market’s strength. Long may it continue.