Used market faces supply shortfall

Date: Tuesday, November 29, 2011

The collapse in new light commercial vehicle sales three years ago now threatens to create a ‘black hole’ in the supply of used vans. James Dallas reports.
Mixed messages are emerging from the used van market as we head towards the end of the year, but if there is one trend most commentators can agree upon it is that there is a dearth of good- quality stock coming to market.
Theoretically this should drive up values for the best-condition vans, but market leader Ford has complained that guide values are too low. Although both BCA and Manheim have noted the supply shortage, Ford claims it is not reflected in higher guide prices.
Ford’s commercial vehicle boss, Steve Clary, says: “The guides are too low, there is no stock at guide price. They haven’t got it right in our opinion.”
Clary argues that the used market is being starved of supply because of the collapse in new sales when the recession struck in 2008.
“Now is when those vehicles would have come through,” he says.
With demand also driven up by the impending expansion of the London Low Emission Zone (LEZ) to include vans, Clary insists used values are significantly lower than they should be.
“If you can start driving up used values the cost to change is less, so drivers of three-year old vehicles can afford to change,” he says.
He claims that in a three-month period Transport for London (TfL) recorded 72,000 vehicles entering the zone, which from January would be subject to the £100 daily charge for doing so. Ford dealers, says Clary, have seen a surge of enquiries from owners and operators looking for vans that comply with the LEZ and he claims that up to 90% of them were asking for used models.
Ken Brown, editor of Cap’s Red Book guide to used LCV values, agrees that stocks of good quality used vans are low, but says this is reflected in high prices for the best- condition examples.
In terms of supply, he warns: “We are expecting things to get much worse before they get better as the market feels the full effects of the dramatic downturn in new LCV registrations in 2008.”
He adds that such is the desperation of buyers to get hold of stock that the indifferent quality of many of the vans coming to market is not pulling prices down. In fact, Brown reckons that the prevalent trend is of market prices heading upwards.

“Not only are auction sale prices soaring for the elusive clean, low- mileage vehicles, but on the poorer quality, high-mileage vehicles too. The strong bidding we are currently seeing on some models, particularly the Volkswagen Transporter, suggests that body and paint damage is being ignored.”
Brown says it is not yet clear whether sustainable retail demand or professional buyers increasing stock levels to guard against impending shortages is driving
up prices.
The catch for used van dealers paying over the odds is that retail customers, feeling the pinch, are looking for cheaper vans.
George Alexander, CV editor for Glass’s Guide, says: “The trick is to offer your customers what they need at a price they can afford. This may mean selling a wider spread of stock with greater emphasis on the value-for-money end of the mix.”
Most importantly, says Alexander, is to have the right stock to attract buyers who still need to keep their businesses going despite being strapped for cash.
In the small van sector Alexander reports ready demand for the Fiesta, Corsavan, 207, Nemo, Fiorino, Bipper and Berlingo, and in light vans the Caddy and Connect remain popular. In the medium van category large numbers of short-wheelbase Transits have kept prices down, but SWB, low-roof Scudo, Expert and Dispatch vans priced up to £2750 are attracting interest. In heavy vans LWB models are commanding premiums of up to £1000 over SWB alternatives.

Stark warning

The stark warning from BCA in its latest report on the used LCV market is that there is potential for a “black hole” to emerge in supply in the wake of new sales dropping to a 15-year low of 186,000 units in 2009. Although volumes have recovered they are likely to remain well below those reached up to and including 2007.
Report author, professor Peter Cooke, says the light commercial parc will age considerably as the much higher new sales from the mid-2000s are followed into the used sector by lower recession and post-recession volumes.
Assuming national demand for used vans of 300,000 a year, Cooke claims that in the period from 2011 to 2015 there will be a shortfall of 275,000 first-time used LCVs in the market.
“As SME’s demand for used LCVs rises, the growing shortage of younger used LCVs will become more apparent, with the likelihood that demand will exceed supply considerably,” he says.

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