What Van? Britain's biggest and best van buyers' guide

Remarketing: Has the used value bubble burst?

Date: Tuesday, April 19, 2022   |   Author: Tim Cattlin

What goes up must come down, and having risen to record levels, industry insiders have detected signs that used LCV values are starting to fall. 

Andy Picton, chief commercial vehicle editor of valuation company Glass’s, says: “Although the average sale price is still over £10,000, it is 13% down on 12 months ago and conversion rates have fallen for the third month in a row.”

Picton explains that with more defleets taking place choice in the market is growing and the increase in duplicated stock is softening values. 

“Add in the current economic and political situation and understandably there is a reduction in buyer confidence.” he says.

Steve Botfield, senior editor for commercial vehicles at cap-hpi
says the company has seen a recent weakening in demand at auction. “In the last quarter of 2021, we had started to witness a deterioration of conversion rates and this has continued into 2022. 

“Volumes of vehicles sold increased in January and February 2022 compared to last year, but comparing 2022 against the pre-Covid-19 average, the volume has dropped by 2.5%. As we started to approach the end of 2021, we saw a gradual cooling off in demand.”

Botfield says vehicles that have become surplus to requirements have been defleeted early this year due to the market returning to normality following the Covid-19 pandemic. 

“Whereas 2020 and 2021 was a sellers’ market to meet demand, 2022 has become the opposite – a buyers’ market, and [with] the repetitive stock choice and fall-off in demand comes the inevitable reduction in prices.” 

Highlighting the delicate balance between supply and demand, Botfield says more vehicles are now entering a market where demand has waned. 

“A rise in interest rates, which is expected to continue to increase in the short term, a significant increase in fuel prices, energy costs going through the roof, government business loans during the pandemic having to be paid back and higher national insurance payments, not to mention the effects of the war in Ukraine, are some of the factors putting a new, unprecedented squeeze on the cost of living. These factors all weigh heavy in the decision-making process to either replace an older vehicle or increase a fleet size,” he argues.

At the coal face, dealers appear to be feeling the pinch. Gareth Kaye, LCV franchise director at Motus Group (UK) says: “Dealers are well stocked and slowing enquiry and sales rates mean they are only buying stock for sold orders or to fill a gap.  

“This means stock with preparation required is even less desirable than normal. There is also margin compression where we have already reached the ceiling of what you can retail a vehicle for but the CAP [guide] pricing, and therefore the expectations of disposers and vendors, continues to be at record levels.”  

Kaye expresses concern at the ability of industry valuation providers to react quickly enough to a rapidly changing marketplace, particularly when fleet companies start to defleet in higher numbers and the balance of supply and demand alters. 

“We need to be clear that when we talk about values there is an ever-widening gap between the market setting [guide] books and pricing in the real world,” Kaye stresses. 

“We have done work on our stock to manage the risk by comparing cap-hpi, Autotrader, We Buy Any Car and Manheim Seller Advance values and there is a massive split between the two remarketers (Manheim and We Buy Any Car) and the CAP and AT – and the gaps are often several thousands of pounds.” 

Sales prices not getting near guide estimates means stock remains unsold as vendors fear losing out, warns Kaye. 

The auction companies could be forgiven for wanting to remain publically optimistic, keeping the market buoyant and positive for the vendors who rely on them to achieve the best return.

All of those What Van? spoke to were subdued in their observations about the immediate outlook. Stuart Pearson, chief operating officer for BCA says: “LCV values have remained at near record levels, with average values staying above £10,000 for three consecutive months. Despite this outwardly strong performance, it is apparent that the external pressures affecting the wider economy are starting to be felt in the LCV sector.  

“Demand remains robust for vehicles in the best condition, although professional buyers are much less enthusiastic about vehicles with cosmetic or mechanical issues,
and these vehicles are becoming very price sensitive.”

Pearson adds that external economic factors are increasingly having a greater impact on the used LCV marketplace, which is largely driven by the needs of the small business and independent trader sectors. These businesses have been under pressure throughout the pandemic and are now having to deal with rising interest rates, increased energy and fuel costs and the cost-of-living squeeze.

Matthew Davock, head of commercial vehicles at Manheim offers some reasons as to why dealers are finding things tough in the first quarter of 2022 compared to the same period last year.

“Euro 5 van prices are, on average, 71% more, or £2,252 more, [and] Euro 6 prices are 58% more, or £4,366 more. Given these price dynamics, cash flow remains the dealer’s biggest challenge. For example a 150 van pitch today would cost you in excess of £2,000,000, just for stock alone! Over the past five months (Nov 21–March 22) 68% of dealers have said retail has been extremely slow.” 

Geoff Flood, LCV sales manager at Aston Barclay has also noticed a transformation in trade buyer behaviour. Noting that: “Conversion rates and prices of LCVs have softened very slightly in 2022, with dealers buying replacement stock as and when they need it. 

“The market has changed from this time in 2021 when anything would sell for silly prices, but now buyers are more considered and that includes avoiding stock with damage. However, they are still paying strong prices for the right stock as there is still a lack of choice available.”

Flood has also noticed valuation guides struggling to accurately reflect the latest values. 

“The used value guides are set for an adjustment as some of their prices are now out of kilter in the market and buyers are bidding on what they are prepared to pay rather than following book prices,” he says.

With hopes the semiconductor shortage is easing and that new vehicle supply could, within the next 12 months, approach normality, will stability in used values return?

Glass’s Picton is not optimistic. “I’m not so sure the semiconductor issue is easing. There are reports from Japan that following a recent earthquake there, production of automotive semiconductors at three plants has been suspended, awaiting damage assessment. 

“The Ukraine war has also seen parts delivery disruption that has affected production of vehicles across Europe and the world, Steering wheels, wiring looms and windscreens are just some of the parts made in the Ukraine. Delivery of certain lower spec vans had seen their lead-in times improve, but I now believe all vans are suffering, with delivery dates quoted for well into 2023.” 

Despite the best efforts of manufacturers to meet demand, unfortunately it seems there could be more pain in the short term.

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