REMARKETING: Will the values bubble burst?
02 May 2014
Used car values spiralled upward in 2013 as supply and demand created a seller's market. Jack Carfrae asks whether the bubble will burst in 2014
It may as well have been Christmas all year round for anyone selling an ex-fleet or
lease vehicle in 2013.
Those with even a passing interest in second-hand values can't fail to have noticed the meteoric rises over the past year. The tail-off in new car sales that bit during the worst of the recession has meant demand has been outweighing supply for a long time, driving up prices to consistent record levels (see graph).
The elephant in the room is what will happen in 2014. Is the value bubble likely to burst?
BCA's operations director Simon Henstock doesn't think so: "There are no signs the demand for retail-quality used cars is going to ebb, so we expect values to remain strong, which is good news for corporate vendors.
"Sourcing vehicles will continue to be a major concern for used car dealers, and if the economy continues to improve, increasing retail demand could mean there is even more competition for stock in the remarketing sector."
He adds: "Whether or not we see the sustained price evolution we have experienced over the past 24 months will largely depend on stock availability and buyer confidence, as price is effectively set by the balance between supply and demand."
Henstock isn't alone in his belief that strong used values are likely to be a fixture of 2014. Few within the industry are predicting anything in the way of a tail-off, but further rises in the same vein as those seen in 2013 are unlikely.
Head of remarketing at Leaseplan, James Hopkins, says: "I expect that over the course of the next 12 months, strong values for ex-fleet and lease-sector vehicles will plateaux. Used fleet cars will retain their current residual values, and we may even see a strengthening of the commercial vehicle market."
As Hopkins suggests, ex-fleet and lease vehicles have done particularly well, something BCA's data also reflects. Henstock points out that values of typical vehicles in this sector are now the best part of £1000 up on 2012.
"Corporate sellers continue to see good returns on their vehicles and should expect that to continue given recent trends. Last year, average fleet and lease values improved by £909 to £8889, a rise of 11.3% compared to 2012. Average performance against Cap Clean improved by half a point to 98.6%," he says.