The Gavel - March 2022
Wholesale market opinion from our resident car and LCV auction experts, Kevin Blincowe and Stuart Peak.
Kevin Blincowe - cars
I have the privilege of writing my first ever update for The Gavel in place of the illustrious Andy Conde this month, and I’m thrilled to have the opportunity to share my views on the used car market after many years working for Manheim. Across my team in the south we cover every aspect of the auction industry. Being in a position of trust between buyers and vendors is an honour that all auctioneers are proud to hold and gives us an opportunity to share market knowledge on an impartial basis.
So, on to the previous month. February felt like a game of cat and mouse between vendors, buyers, and valuers. Should we hold or should we raise? We now know the answer – prices have been held after a cagey month on both physical and virtual rostrums.
Without a doubt, supply is still lagging behind demand as low price vehicles are hotly contested. We are still seeing some resistance on the higher end of the market and vendors who have £15k to £20k vehicles to dispose can find good results, but this varies week by week depending what is on the buyers’ shopping lists at that time.
The latest figures paint a clear picture of what’s happening. Stock in the ten-year/100k category is up, 5-year/80K also up, but 3-year/60K is marginally down. As has been the case in recent history, any units Grade 2 and higher with good SureCheck reports are really driving prices to their upper limits, while the less desirable cars bring the average CAP performance down.
For the first time in two years we have seen some ‘normal’ seasonal fluctuation. The lanes felt noticeably quieter over the half term holidays as people took time off or went away for the first time without the need for testing or isolation. But on the retail side I suspect dealers may be sharpening their pencils for some price reductions as I’m hearing that units are not flying off the forecourt as they once were. Will this cause a drop in used car values? I very much doubt it as used car stock levels will not be high enough to allow it for some time.
Looking ahead, we go into March with some stability in values for the first time in a while, but without a doubt there are headwinds coming our way. The war in Ukraine, sanctions on Russia, interest rates, and the rising cost of living will all have an effect on the automotive industry.
From an auctioneer’s perspective, how do we deal with it? To coin a well-used phrase, we put a smile on faces and a pound in the pocket. We have a privileged position between buyer and vendor, and over the years it has been our job to build relationships with our customers. The smiles on faces comes from our can-do attitude and willingness to remain positive no matter what.
But what about the pounds in pockets? Simple really, to gain a fair price on every car means to ensure everyone gets a slice of the pie and a bit of the profit. That’s the name of the game, and no matter what we will endeavour do this for you.
Stuart Peak - LCVs
Last month I wrote about how the market was getting busier, and that continued throughout February with arrivals tracking 30% up year-on-year. This means there is more choice, so buyers can afford to be pickier, and with prices at record levels, we have certainly seen a softening of market conditions and prices again.
Combine this with the current economical and political factors that we are all facing, it comes as no surprise to see buyer confidence somewhat lacking, especially with reports from the trade that they are well stocked and retail activity is generally flat.
Our average selling price reduced by £328 in February compared to January, down to £10,680 overall, but still our third strongest month on record. However, our average mileage increased by just under 5,000 miles and average age reduced by 0.7 months. From a pound note perspective, LCVs still performed 13% stronger in February than last year, but we have also seen conversion rates reduce with three out of five vans offered selling first time, compared to four out of five last year.
We are seeing a different set of market dynamics playing out so far this year, a trend that we started to see in Q4 2021. With mileage and damage levels increasing and record CAP prices, it comes as no surprise that the market has started to feel tougher after such a buoyant 20 months.
If we look at the market from a CAP perspective, we did see some marginal reductions going into March, but with the market tracking at 93.5% of average throughout February, we are expecting to see some larger reductions as we go into April. Whilst I don’t envisage the market ever returning to pre-pandemic levels, it does feel that we need to start seeing some realignment in certain areas such as chassis and large panel van product.
We are still seeing record levels of buyers logging on to each of our daily sales events and we have also revised our sales calendar going into March with additional bespoke sales events created throughout the month on Tuesdays, Wednesdays, and Thursdays. Feedback from our buyers so far has been excellent regarding the newly created sales and many of these events are being conducted virtually around our network of LCV sites.
To summarise, I believe that with everything going in it often helps to take that step back to see the bigger picture. While we have seen some softening in the market recently, the market has moved forwards so much since COVID-19 entered our lives. In pound note terms, the market is still performing at near-record levels, but we all need to be aware that there is now more stock around and retail activity is not as strong as what it has been, therefore we expect softer market conditions to continue for the time being.