The Gavel - July 2021
Wholesale market opinion from our resident car and LCV auction experts, Andy Conde and Stuart Peak.
Andy Conde - cars
Over the past two months we have seen an unbelievable uplift in prices on virtually all makes and models of vehicles coming under our gavels. CAP have increased values across the board by just over 10% and with the number of vehicles coming up for sale, I can see another substantial increase as we move from July into August. Historically, this one of the quieter months of the year when it comes to car sales as consumers’ thoughts turn to holidays in far off lands rather than their next car, but as we all look forward to holidaying in the UK rather than overseas – or even skipping a year altogether as I know some people are - our disposal income has increased and therefore we have more pounds in our pockets to buy the cars of our dreams.
The only caveat in this fantastic market conditions is the older, less desirable product with higher mileages continue to be a challenge. But over the tail end of the last month, we have seen many car supermarkets and dealers buying the lower grade product in the hope of actually making a ‘silk purse from a sow’s ear’ as the stock they really want – those lovely one owner, low mileage little pippins – has become less and less available.
Some of the prices that we have seen in the auctions have actually exceeded forecourt prices at times. Dealers really do need to be on their toes at the moment to make sure they are not underselling because that is quite easy to do in this fast-flowing market that we find ourselves in.
The change to digital selling and buying has certainly been a big learning curve to us all, especially technology Neanderthals like me. Who would have thought that in March of 2020, a whole nation would radically change the way we operate in such a short time? And who would have thought that many of the buyers who vowed never to buy a car online now do so as a second nature! More than I care to mention have now said to me they don’t know how they operated, driving hundreds of miles each week to source stock when it can be done with ease and convenience of the click of a button.
Sourcing stock is going to become increasingly difficult with many dealers all fighting for deals and this will continue to increase the value of a part exchange as they will be forced to pay over and above the current market value to secure a sale. But every asset has a limited value and this eyebrow raising period cannot carry on. I hear stories that many new car orders are now being put on hold and any new cars ordered for September will not arrive until early next year. The September new car figures will be very interesting, and you can see that concern translating to the wholesale market as the price of late year low mileage used vehicles continues to go through the roof.
So, hopefully come 19th July, we will have entered into some form of freedom - whatever that new freedom looks like - and some kind of normality will be with us. But that is not to say that we will see things change dramatically overnight. Not only will our industry have to deal with the fall out of Covid-19, but we will also need to cope with the fall out of Brexit which appears to have faded into the background over the past few months.
However, as far as used vehicles are concerned, I do not believe that we will see any form of uplift in supply this side of 2022 and then who knows what will happen.
Stuart Peak - LCVs
So, what has been happening in the LCV world over the last month? The LCV sales have most certainly had a seasonal feel to them which comes as no surprise as football fever has hit over the last few weeks. Whereas May felt like a month of two halves (pardon the football analogy(ies)), June felt like the Euro Championship final would feel after playing 120 minutes and then winning 11-10 on penalties!
Each and every sale seems to be a hard-fought battle and whilst the results are still excellent, buyers are most certainly bidding with caution. I am predicting that this theme will continue throughout July and August and then we shall start to see more buoyancy again from September onwards.
I am delighted to report that we smashed our previous record set in a single month for average selling price, now over the magical £10,000 mark and up to a mind blowing £10,222. This beats our previous record set back in April by £315! To put this into context, our average selling price in June 2020 was £7,659 and June 2019, it was £5,706… representing a 33% on prior year and 79% on 2019 measures. Staggering!
Yes, we know that stock profile obviously does play a part, but the average age of stock sold in June 2019 was only two months older and average mileage was less than 3,000 miles more…. I for one know that if you had two identical vans stood side-by-side, with one being just two months older and with 3,000 more miles on the clock, the lower mileage, younger example would NOT make another £4,500 more than its sister vehicle if sold on the same day. It really is mind blowing how far the market has moved over the last 24 months.
The general feedback the team has been receiving over the last few weeks is that from a buyer’s perspective, retail activity is flat to steady at best and I am sure that we shall see this continue over the summer period. Some 68% of buyers reported a slowdown in both demand and enquires, plus many are reporting challenges around getting vehicles prepared from a time perspective and an increased cost in paint and vehicle parts. More than half (58%) of buyers said that with the money they are paying for used vans today, they would not stock more than three of the same van specification at any one time.
Taking all this on board, my advice to vendors would be to get the green light on and let buyers know that the stock is there to be bought, it makes a HUGE difference to a sale and those that react quickly will always be the ones to reap the rewards on both performance and first-time conversions. Our first time conversions fell by 5% vs May, whilst these are still sat at a healthy 83% for the month, it is always a tell-tale sign that buyers are being selective with their purchasing.
There has been a smaller increase in CAP prices going into July, at just 0.8%. In my opinion, if we look at where guide values are currently, I will say that across the board they are where they need to be. However, condition is playing an instrumental role in a buyer’s decision-making process and frankly, our first time conversions would be higher if some sellers were taking damage levels into account, particularly on heavy duplication. Again, my advice would be to light that green light up on the vans with heavier levels of damage and think of it from a buyer’s perspective around how much money they will have to spend to still turn a profit selling it. At the end of the day, everyone is in it to make a few £’s, but the buyers will absolutely switch off if they cannot see profit margin opportunities. Yes, some makes and models shall continue to exceed guide values especially in the Euro6 bandings, but we are seeing an increasing number of vehicles that are not quite making the money, more often than not due to condition.
So, to summarise June’s performance. It’s been another record breaking and excellent month, but one that was certainly a hard-fought victory. Who knows how the month may have gone had we actually had some nice weather to go with the football!
On a final note, my phone is always on for valuation advice and staying in touch with a fast-moving LCV marketplace we are witnessing. That second opinion can be the difference between a profit and a loss so get those calls and emails flying my way. 07917058408 email@example.com