REMARKETING: The changing of the seasons
18 December 2012
The used car market is just as susceptible to seasonal patterns as any other, but there are those in the industry that believe the time of year now counts for less than ever before. Jack Carfrae reports
Seasonal market changes are no secret. Whatever medium of business you're in, the time of year you buy, sell and dispatch stock into the marketplace can make or break the end result.
Second-hand vehicles are no different. Their prices rise and fall with the seasons in a usually typical fashion and they're just as fragile - if not more so - than any other kind of stock.
Predictably, vehicles with body styles built around the weather are those that are the most susceptible to change with the seasons, as BCA's operations director Simon Henstock explains: "There is always an element of seasonality attached to the sales of convertibles, which tend to do better in the spring and summer months. Despite our notoriously changeable weather, British motorists buy more convertibles than our European cousins and increased demand will drive average values up as the warmer months approach.
"In contrast, average values for 4x4, SUV and off-road vehicles typically climb when the weather is worsening, with snow exacerbating any rise quite dramatically. Nothing makes four-wheel drive more attractive than a dusting of snow around the UK and the severe weather we experienced in 2010 and 2011 confirmed that, with 4x4 values reaching record levels during those periods."
The remit of cars to which seasonality extends goes further than glass-box convertibles and 4x4s, though. Convertibles with folding metal hard-tops and other such derivatives are just as susceptible to seasonal market changes as traditional soft-tops, as Ogilvie's operation's director, Jim Hannah, explains: "While 4x4s and soft-top convertibles are the obvious examples of cars impacted to a degree by seasonal demand, other models where demand is determined by external factors are 'hard-top' convertibles. Drivers are not taken in by motor manufacturers' marketing departments trying to convince them that the hard-top convertibles with a roof that folds into the boot are anything but a traditional convertible so the remarketing rules that apply to soft-tops apply to these 'new' vehicles."
But it isn't just the weather or physical time of year that has an impact on the used car market's behaviour. The new car sector's regular, annual actions have a direct impact at second-hand level, specifically at new registration time. Henstock continues: "The registration plate changes in March and September traditionally stimulate new sales, and plenty of dealer part-exchange stock will reach the remarketing sector.
"Any uplift in volume has the potential to change the balance in supply and demand and can impact on the fleet sector as buyers simply have more choice. Post-recession numbers are much lower, however, as new car retail sales have yet to fully recover."
Mark Sinclair, chief operating officer at Tusker, also acknowledges that the market fluctuates when new registrations rear their heads, but claims that supply and demand tally to create less of an impact: "Registration plate changes tend to have only a limited impact on prices because, although there is a high level of supply, there is also a high level of market demand in both March and September."
Like plenty of other industries, the used car market took a hammering in the recession - so much so that its usually dependable seasonality was thrown completely out of sync. The belief among the industry was that, for some time, seasonal remarketing trends almost ceased to exist. Some believe that they now appear to have settled back into more usual patterns, but many are of the opinion that the time of year counts for less when it comes to value fluctuation.
Scott Holland, strategic remarketing and supply manager at Hitachi Capital, takes the former line: "We are now back in a normal marketplace with a lot fewer vehicles around than pre-recession, giving the market a strong feeling."
However, there are those who think seasonality continues to count for less than it did pre-recession, such as Hannah: "Due to a shortage of used cars being generated, the importance of seasonal trends are diminishing and all types of vehicles are in demand year-round. We are selling cars as quickly as they are defleeted - and have been for about 18 months - as there is no benefit to holding on to them or moving them around the country. Demand is driving supply and I think that bubble will continue for at least the next 10 months."
Sinclair points out that large, four-wheel drive vehicles are now under greater influence from other factors rather than the time of year or weather conditions: "Some seasonal trends have definitely seen a shift in pattern. The market for vehicles such as 4x4s, for example, is very susceptible to the latest fashion.
Only a few years ago, the market for 4x4s was very poor as no-one wanted a vehicle that was seen as a gas-guzzler and environmentally unfriendly. That market has come back now and is strong again."
Controlling the time of year that vehicles are defleeted can be tricky, particularly if it's dictated by lease terms, but if you are able to pin it down to a precise time on the calendar, then it's worth doing.
Sinclair says: "One of the strongest months of the year for resale prices is January, when trade stock levels are low and customers start buying again after the Christmas break. Conversely, December is a bad month for disposals due to poor demand caused by the proximity to Christmas."
Holland agrees, but believes there is more scope to cash in on the best values than just one month: "Remarketing prices are based on demand so the best time is when the market is short of vehicles more than time of year. Seasonally, the best months have been January and April - before [summer] holidays - and then again between September and November."
Worthwhile though tactical yearly remarketing is if you can do it, the advice is not to obsess over it at the expense of effectively operating a fleet. GE Capital's fleet remarketing leader Tim Maffey says: "In operational terms, it is very difficult to take advantage of these price fluctuations from a de-fleet point of view.
"Given the large variance in manufacturer lead times when it comes to timing replacement vehicles, and the inherent volatility of the used car market, trying to time disposal in this way would be an operationally complex process that wouldn't necessarily yield increased returns."
Opinion among the industry is divided when it comes to the correlation between internet selling and the seasons. Some believe the ever-increasing clout of online buying and selling has gently impacted used vehicle seasonality and is also serving to reduce the once predictable nature of year-round used sales.
BCA's Henstock thinks there has been a gradual change: "The broader seasonal patterns - busy early in the year, slower post-Easter and into the summer, then picking up again in the early autumn - are a little less defined than they once were, but not because of any post-recessionary hangover.
"Thanks to online selling, the used car trade rarely has any down-time these days, and with increasing volumes of business being conducted over the internet you can technically buy a 'virtual' used car at any time of the day or night, 365 days a year."
Hannah takes a stronger stance to the contrary and claims that there has been no change whatsoever: "Online sales have changed nothing. Demand is all market-driven and online sales have not changed the way the business works or impacted on seasonality. The only thing that online sales have brought is more buyers."
Sinclair agrees, saying that online sales have altered some buying habits but not seasonal changes: "This does not have the effect of increasing resale values, it simply helps buyers locate the right vehicles and provides yet another route to market."