REMARKETING: Coping with changing seasons
02 September 2016
Author: Debbie Wood
Before the days of online selling and virtual auctions it made sense, at certain times of the year, to hold off selling vehicles to get the best value for your ex-fleet stock.
But in today's digital world, how much effect does seasonality really have on the used car market? And should fleets be looking at extending cycles to get the best price?
4x4s and convertibles
It's well documented that demand for 4x4s increases in the run-up to winter and then drops off again in the spring. However, with the rising popularity of SUVs and crossovers - cars that prove desirable all year round - data suggests that seasonality is only really a factor for proper off-road vehicles now.
"With the increase in SUV-type vehicles in the market place, it can be hard to draw the line as values for the crossover segment remain stable year round," Martin Potter, remarketing director at Aston Barclay, tells BusinessCar. "Despite the rapid development of the SUV market, though, where models are seen as a jack-of-all-trades rather than just a traditional off-roader, we haven't seen an adverse effect on 4x4 values. Many buyers select 4x4s for a dedicated purpose, such as an additional vehicle for construction use, whereas SUVs remain popular year-round due to their family-friendly ability, load capability and towing requirements."
According to Simon Henstock, BCA chief operating officer UK remarketing, demand for 4x4s increase when the weather worsens in the UK, especially if we experience any snow.
"Average values for 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 have experienced in recent years confirms that," he explains. "The increase in availability of SUVs has broadened the choice for buyers but hasn't impacted demand in the used market."
Convertible values perform better in the spring and summer months, and despite its changeable weather, the UK sells more than most of its European neighbours. Although June 2016 was reported as the wettest month on record, figures from BCA show this didn't deter convertible car buyers, with an 11% upturn in values to £10,314, compared with £9288 in May. Average prices also improved year on year, rising by 5% compared with the same month in 2015.
"There is usually 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," Henstock adds.
However, according to Alex Wright, managing director at Shoreham Vehicle Auctions, these trends could be changing as car buyers are becoming more informed about the best times to purchase a convertible.
"The hard-top technology now frequently used in modern convertibles makes this segment constantly popular, with increasingly savvy buyers taking advantage of lower prices heading into winter to purchase used convertibles, putting them into storage ahead of the warmer weather," he says.
Avoid de-fleeting at Christmas
The holidays, especially Christmas and Easter, have traditionally caused the remarketing industry to slow and values to fall because there's a decrease in demand. The impact of the Easter break effects values less than at Christmas, though, because the time of year it falls constantly changes and, according to Wright, the March plate change limits the impact.
"As Easter frequently falls around the March plate-change period, values and volumes aren't adversely affected at this time of year as much as they are at Christmas," he tells BusinessCar. "Due to the amount of volume in the market at Christmas and low demand causing prices to fall, fleets should work hard on properly preparing used stock for the New Year, working with their remarketing provider to ensure their stock enters the market at the right time."
Although traditionally demand and values both fall around the festive period, in 2015 Aston Barclay bucked this trend, and Potter is encouraging fleets to not follow old rules of thumb and instead work with their remarketing partners to keep informed when trends like this occur.
"In 2015 we experienced a change in appetite during the lead up to Christmas, with fleet sellers continuing to sell in volume right up until the break with no adverse effect on prices or conversion rates. We believe that this practice should be considered going forward as we see no reason to withhold stock until the New Year," he explains.
Although seasonality can have an impact on used values, Henstock is quick to point out that there are other factors that carry more weight on the pricing of used vehicles, and fleets should be careful not to keep hold of their ex-fleet stock too long.
"When it comes to remarketing ex-fleet vehicles, seasonality is just one of the factors that fleet operators should consider, but not at the expense of age, mileage and condition, for example, which all have a far greater bearing on the price achieved," he says.
"The best practice is undoubtedly to remarket vehicles as quickly as possible as these are valuable but depreciating assets. Holding costs can eat into possible returns and there are obviously no guarantees that deferring a sale for a few weeks will result in an appreciably higher return. That said, it makes sense to sell a vehicle at a time when demand will be at its peak, so working closely with your remarketing partner to plan an effective sales programme will bring its own rewards," he adds.
Fleets looking at extending replacement cycles to more popular times of year could also cause a negative effect on pricing, Potter warns.
"With the majority of vehicles becoming popular throughout the entire year, it may lead to the blurring of specific cars having 'seasonal' appeal - fleets that choose to hold stock until a perceived increase in demand could potentially flood the market and drive down prices, especially if this were to become standard practice across the industry," he says.
Henstock concludes that the effect seasonality has on values is not as prominent as it once was and the growth of online selling has been a key reason for the change in tide.
"It is worth remembering that high-demand, popular models will sell strongly relative to the market whatever the time of year, and well-maintained ex-fleet cars are always likely to attract the buyers," he explains. "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. Thanks to the effect of online selling, the used car trade rarely has any downtime 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."
Is the plate change a key driver?
The busiest time of year for new and used car sales is when the new plate changes come into effect in March and September. Autorola UK says this spike in trading now typically takes 10 weeks before stock levels settle back down again to business as usual.
"Our used sales and stock volumes on our online portal have continued to grow year on year and visibly during 20 weeks of the year around plate changes," explains Neil Frost, Autorola UK's operations director.
"The hiatus around a new plate change has grown on average from six to 10 weeks simply because of the ever-growing volumes of new and used cars coming into the market place," he adds.
The uplift in supply and demand can have an impact on values, though, warns Simon Henstock, BCA chief operating officer UK remarketing, and fleets should consider staggering their stock into the marketplace.
"The registration plate changes in March and September traditionally stimulate new sales, and plenty of ex-fleet and dealer part-exchange stock will reach the remarketing sector. Any significant uplift in volume has the potential to change the balance in supply and demand and can impact on values as buyers simply have more choice."
According to the latest post plate-change data from RV expert Glass's, conversion rates fell compared with pre-March activity in the market, although the demand remains for lower-mileage, good-condition vehicles, helping to keep prices steady for the time being.
"The number of pre-registration cars in the market and attractive finance packages on brand-new vehicles is placing its own pressures on the used market," says Martin Potter, remarketing director at Aston Barclay. "Naturally, there is an influx of dealer part-exchanges and de-fleeted vehicles coming through during the plate-change periods, but this is increasingly spread over a longer period of time, rather than strictly in March-April and August-September, softening the potential impact on prices when supply heavily outweighs demand in the used market."
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