The Gavel - May 2021
Wholesale market opinion from our resident car and LCV auction experts, Andy Conde and Stuart Peak.
Andy Conde - cars
After what felt like an eternity during the cold winter months in lockdown, it has been great to see physical showrooms reopen across the country. And while we were unsure what retail demand would be after the initial reopening, it turns out there was no need to worry, with reports that consumers have flooded back in big numbers. It seems the days of customers wanting to view and test drive a vehicle before purchase have not ended just yet.
As for the wholesale market, the hot topic is supply and demand. The trend for the last year has been that supply is not enough to meet demand, and this continues to be the case. But take a closer look at the market and three distinct categories appear, each with their own set of challenges and opportunities.
Firstly, manufacturer vehicles. Late and low mileage cars that have been drip fed into dealerships over recent months are now commanding extremely high prices. The lack of new car product due to manufacturing problems is well reported, so dealers are being forced into buying 12/18-month old vehicles rather than brand new to compensate.
The second category is fleet vehicles. A large number of our fleet auctions are enjoying regular conversion rates above 90% and CAP figures well in excess of 100%. Buyers are keen to acquire premium, ready-to-retail stock and are willing to keep their finger on the bid button and pay a premium to make sure that happens.
The third category is the important cheaper end of the market: dealer part-exchanges. Wholesale supply shortages mean dealers continue to hold on to the best part-exchange stock they receive rather than pushing to auction as they might once have done. Those grade 1 and 2 vehicles with few owners and sensible mileage on them are increasingly hard to come by in the wholesale market, and grade 3s 4s and 5s are filling their place. These often have excessive mileage and no MOT – yet come with high reserves as the dealers have had to give top money to do a deal.
While we have to accept that’s the current situation we’re in, I do believe that things can return to normality in the dealer part-exchange category once general supply problems improve. In the meantime, I must stress that auctioneers aren’t magicians, despite what many of us think, and we can’t always pull a rabbit out of the hat. I would urge everyone taking in part-exchange vehicles to have a good look at the condition, ownership and MOT status of the vehicle and make a sensible offer so you’re not trying to recoup the losses at auction.
With all this in mind, it’s unsurprising that we saw a 3% CAP increase from April into May, and values increased 1.5% on the last ten days of the month alone. Looking at the market today, in my opinion it’s only going to be the lower end of the market that prevents a similar increase from May into June.
We usually expect a summer slowdown with high stock levels and reduced interest due to holidays, but this year will be very different. I anticipate the current trends to continue for some time while we wait for supply issues to get sorted, but once they do, we should see a levelling in the market. For now, pent-up retail demand will continue to outpace supply.
Finally, I would urge all vendors reading this to be patient. The market certainly isn’t what we’d call ‘normal’ at the moment, but we know the reasons why and it will fix itself in time. I would ask all vendors to allow the market to find its level, be prepared to listen to bids, and allow buyers to get the stock they so vitally need. Dealers are crucial to this industry and we must support them during challenging times if they are to still be here to bid at auctions in the future.
Stuart Peak - LCVs
For well over a year now in these updates I have spoken about how buoyant the LCV market has been, and at the risk of sounding like a broken record, it’s safe to say last month was much the same.
There was certainly a more seasonal feel to April, particularly in the early weeks around the Easter period which was not a huge surprise. However, we did see a record average selling price for the third month on the trot, and by some margin too, this time up £325 to £9,907. Overall average age fell by two months and average mileage reduced by 1,900 miles for the month, so all in all it was the perfect recipe to break another record.
It seems unbelievable that our average selling price is fast approaching £10,000. The question is, can it continue? I was having the exact discussion this morning with two of our Colchester customers from two of the local large Ford franchised dealer groups, and we all believe that the market is more than sustainable. With the current supply issues of new LCVs and extended lead times – often well into next year – end users will almost certainly have to look at buying nearly new or used vehicles to meet their demands.
The news from Ford three weeks ago around the shortage of semiconductors and Transit production stopping between 19th April and 13th June has caused many buyers to sit on the fence initially. However, demand has increased for nearly new Transit over the last week or two which is encouraging to see, and I expect this trend will continue throughout May and beyond.
I recently analysed some sold data around older stock (seven years and older) and the price increases post-Covid are mind blowing. CDVs have increased on average 96%, small panel vans 73%, and large panel vans 80%.
Euro 5 stock accounted for 42% of our total sold volume throughout April and it is fair to say that we have continued to see incredibly strong demand within this sector. Quite frankly our buyers cannot get enough of it. With this age of vehicle representing good value for money compared to the newer Euro 6 vehicles, it is hardly a surprise of how well it is performing.
That said, we did see a £300 month-on-month increase in average values for Euro 6 vans, up to £13,175, and truthfully, I can only see this figure going up throughout May as buyers compete hard to fill their forecourts. As always, condition is key and the cleanest, highest specification vehicles continue to make a premium. Condition seems to become less of an issue when it comes to older Euro 5 stock as buyers generally accept the fact that the vehicles is older and is likely to need some preparation work prior to selling. However, condition always needs to be taken in to account when valuing part-exchanges and when setting reserves on fleet vehicles.
We have seen a larger increase in CAP values this month, particularly in the 1-2-year-old bracket which comes as no surprise taking into account what I previously mentioned around long lead times for new vehicles. Some age bandings have remained static however, which I would not disagree with. To summarise, the LCV market continues to perform incredibly well, and I do not see any signs of this slowing down any time soon.