NEW CAR REGISTRATIONS
The SMMT reported that registrations in February fell 3.2% year-on-year. In view of the fact that
registrations in this month only account for a little over 3% of total annual sales we should be
cautious about placing too much interpretation upon them. The combined results for the first 2 months
of 2007 are showing that the market has grown by 2.5% – helped by a depressed market in January 2006.
However, it is doubtful whether new sales in March – the biggest of the year – will have come close to
the total for the same month last year, with the prospect that the first quarter of 2007 will produce
a negative variance when compared to 2006.
RETAIL SALES
Dealers felt that the footfall into the showrooms improved a little from the last week in February.
Where the improvement was noticeable the issue then became one of securing the right stock and
quickly. Quite rightly, part exchanges were the first and obvious source but, as usual, they could not
be relied upon to meet short term stocking needs. Even the modest improvement in sales still left many
dealers to reflect that market conditions were slightly more favourable 12 months earlier.
WHOLESALE MARKET FOR OVER 1 YEAR OLD CAR
So far this year Eurotaxglass's have commented that the amount of buying activity has fallen a little
short of expectations and whilst this was still true in the first half of March Eurotaxglass's sensed
that the sentiment was a little more up-beat.
Not surprisingly, there was a significant increase in the volumes of part-exchanges generated from a
rise in new car demand following the arrival of the ‘07’ plate. Fleet and leasing companies also
contributed to the greater numbers with an influx of 3 and 4 year old cars. Given that the wholesale
market has not shown significant strength or momentum so far this year there was always the risk that
the rising supply would create an imbalance with the prevailing demand. In the event this appeared not
to happen but this statement does require qualification. The demand for well presented cars of
reasonable specification, colour, mileage and provenance was insatiable. Most of the dealer overage
cars fell into this category and both the demand and the sales proceeds were often a pleasant surprise
to the vendors. The problem was that for a typical auction entry, there were too few cars matching
this description.
Taken at face value it would appear that the numbers of indifferent and below average cars had
increased relative to the better examples but, in reality, this mix had not changed significantly, it
was just that there has been a greater desire to purchase the better cars for stock. Vendors were
generally satisfied with conversion rates in the region of 80%.
WHOLESALE MARKET FOR UNDER 1 YEAR-OLD CARS
Demand for 6 month to 1 year old cars is best described as reasonable but variable. The variable
elements are dependent upon two factors: the supply of ex-rental cars offered to the trade, and the
number of self registered 3 to 5 month old cars sitting on the forecourts of franchised dealers. For
individual manufacturers’ cars, demand can be anywhere between the extremes. For both these variable
elements the number of Fords – relative to their new car market share – has been low, so the trade
demand is relatively good, and a similar situation exists for Vauxhall. The converse has tended to be
true for Volkswagen and Peugeot; and for BMW it is not the ex-rental numbers that are a cause for
concern but the high number of ‘56’ plates.
PRICES
Leaving aside the variability of the late used car market, strong competition kept prices for the best
2 to 7 year-old trade cars high, but for most other cars prices wavered a little. The difference
between a middle of the road 3 year old ex-fleet car in good condition, in an attractive metallic
colour with air con and a mileage below 70,000 could have made £750 more than a model of similar age
and mileage but inferior in all other respects. The encouraging thing to note was that the indifferent
and poor examples were attracting successful bids, which is only possible when the retail market is
performing reasonably well.
Looking at wholesale prices for 3 year old cars in their entirety, the trend of recent years is for a
month on month improvement in January and February. Whilst this has also been the case so far this
year, the rate of improvement has been more subdued. The cumulative effect of rising prices in the
first 2 months was 2.3% compared to 5.9% last year.
PROSPECTS
The market will now be handling the highest level of wholesale supply seen at any point so far this
year, because of the arrival of the ‘07’ plate. This will also represent its biggest test unless there
is sufficient retail demand to fuel trade demand and support prices. On the evidence of retail
business transacted in recent weeks this is unlikely. However, no one is predicting anything worse
than a marginal downturn, based on the opinion that customers will be adopting a slightly more
cautious attitude to their spending. The one thing in support of this view is that the market has been
very steady in the last 6 months.
GUIDE VALUES
We believe a balanced view of market conditions translates into a 1% reduction in values this month.
Convertibles and sports coupes are expected to be coming into season and values are unchanged.
Even though values in the first 3 months of 2007 have been less robust than a year ago the residual value position, year-on-year, is still some 3% higher.
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