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Remarketing: Pushing the value boundaries

Date: Monday, January 17, 2022   |   Author: Tim Cattlin

With the global semi-conductor shortage forcing fleets to retain ageing vehicles, the used van trade has been chasing an ever-dwindling supply. 

This has triggered the stratospheric rise in prices which, until very recently, seemed unstoppable. 

Phillip Nothard, chair of the Vehicle Remarketing Association says: “This has been an extraordinarily buoyant year for the used van sector with many VRA members saying they cannot recall a period like it. Stock shortages – especially of vehicles that are Euro 6, CAZ and ULEZ compliant – have meant that values have been very high for a sustained period of time.”

Andy Picton, chief commercial vehicle editor at Glass says: “The year of 2021 has been quite remarkable for LCVs.”

“A shortage of new vehicles – due in the main to supply constraints – has resulted in rocketing demand for clean and retail-ready used LCVs. This has seen anything clean and tidy or unusual eagerly snapped up, regardless of age.” 

Acknowledging the rocketing values in the past year, Picton adds: “The average sales price during 2021 has increased by a remarkable 23.4%. Stock under two-years-old has seen its average price elevate by nearly 30% over the period. All of this while the age profile has remained pretty static.” 

Cap-hpi has seen even higher rises in values with chief commercial vehicle editor, Steve Botfield suggesting that prices have increased by an average of 29.3% at three years / 60,000 miles for a diesel vehicle on the back of a 27.3% hike in 2020. 

“Electric vehicles did not have the same increase, but increased all the same by 20.9% for 2021 following a 6.3% increase in 2020,” he adds.

While acknowledging the role the semiconductor shortage has had in raising used values, Botfield cites other factors that have added fuel to the fire. “With an ever-increasing demand for household tech this (semi-conductor shortage) put automotive to the back of the queue when the world emerged from the first lockdown. This then extended to other raw materials, such as timber, rubber and latterly aluminium, all of which play some part in the construction of commercial vehicles.” 

Looking back over the year, Botfield observes that “the summer months did give some respite for the premiums that were being paid in the used market as we started to get back to some form of normal seasonality. But with September came the push again for used stock and with that came an increase in prices once again. For the first time, we saw new registration volumes fall to 6% behind the pre-pandemic numbers, so those widely reported shortages started to filter through”.

Shoreham Vehicle Auction’s commercial vehicle sales manager, Tim Spencer says the new van shortage has created a perfect environment for the few businesses disposing of late stock. 

“Nearly new vans coming to auction on a 21-plate are facing the challenge of prices being close or higher than their cost new price.

“Therefore, buyers are [only] buying an LCV, particularly bodied chassis cabs to fulfil customer orders, rather than buying at this pricier end of the market just to fill spaces on their forecourt.”

The lack of appetite for Euro 5 and earlier vans due to the increase in the number of Ultra Low Emission Zones is becoming evident in sales data and sentiment being received by the valuation guides. Glass’s Picton sees this divide continuing into 2022. 

“The end of the year has seen leasing companies start to actively de-fleet Euro 5 stock, which in turn has started to change the age and mileage profile in the used market. 

“This will mean the cleanest late-year Euro 6 stock will continue to command strong prices, while we expect to see values for older Euro 5 stock start to decline as more examples enter the marketplace.” VRA’s Nothard concurs. 

“One trend to watch is the continued emergence of a split market, with Euro 5 values softening slightly and Euro 6 remaining strong, as the operational viability of older vehicles in some areas is further affected by regulation.”

Cap-hpi’s Botfield suggests customer environmental concerns could also be a factor. “As we entered the final quarter, it was clear that demand had started to curtail for certain vehicles, in particular those powered with anything less than a Euro 6 diesel engine. 

“This could be a direct result of the amount of news stories surrounding climate change and the ever-increasing number of ULEZs being introduced.”

What’s in store for the year ahead? 

Stuart Pearson, COO at BCA UK:
“With delays in delivery of some new models anticipated to continue well into next year, LCV values in the wholesale used market are expected to remain strong for some months to come.”

Gareth Kaye,  group van franchise director at Motus Group (UK) Ltd:
“I think it will be another year of strong prices but mainly down to supply, not necessarily demand.  Some manufacturers are getting some supply through for Q2 so the price between late-plate and new will narrow then. All in all, I am still expecting a decent year with strong sales, but it does feel like the headwinds are starting to blow for the used sector.  The brave and switched on dealers will be fine but anyone carrying too much stock and not reacting to movements could soon get caught out. I am hearing rumours of dealer groups changing their 90 day stocking policies as the old rule of a [older] vehicle costing you money is dispelled by the increases of prices.”

Geoff Flood, Aston Barclay’s LCV national sales manager:
“We see the used market remain strong while demand exceeds supply, and prices are likely to stay where they currently are. We are entering a new period of stability, which is good for both vendors and buyers.”

Cap-hpi’s Botfield:
“One thing that’s for certain is that the used market will continue to be dependent on the availability of the right stock, demand in the market remaining and manufacturers being in a position to supply those new vehicle replacements.”

Glass’s Picton:
“New market volatility will continue into 2022, with component shortages expected to remain an issue for at least the first half of the year.”

VRA’s Nothard:
“The underlying issues that are affecting the used market, such as poor new vehicle supply, are only going to improve relatively slowly. One trend to watch is the continued emergence of a split market, with Euro 5 values softening slightly and Euro 6 remaining strong, as the operational viability of older vehicles in some areas is further affected by regulation.”

 

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