Remarketing: Demand for second-hand vans
11 December 2017
Author: Jack Carfrae
Demand for the best quality second-hand vans has outstripped supply for some time. Jack Carfrae asks how the used LCV market is coping and what's in store for its future.
New-van sales in the UK shot up between 2012 and 2016, and although the market has begun to wane, logic would suggest that a leap from around 250,000 to 380,000 registrations within those four years would be sufficient to get some used stock moving through the auction halls.
Second-hand LCVs are certainly shifting, but demand, particularly for the best stock, is still far ahead of supply, and prices for good-quality used vans are extremely high.
"The market is on fire. Volume is definitely down on stuff coming in everywhere," says Tim Spencer, Shoreham Vehicle Auctions' commercial vehicle manager. "Everybody wants 3.5t panel vans; age and mileage are irrelevant."
Jim Hannah, operations director at leasing firm Ogilvie, says the firm's defleeted vans made, on average, 104% of CAP between July and October: "That is CAP average, because we don't expect the vans to be in clean condition, so that 4% gap probably brings them to CAP Clean level. The cars are running at about 101% of CAP Clean for the same period."
Short-wheelbase vans, in good condition with car-like specifications, are making exceptional money. Andy Picton, chief commercial vehicle editor at residual value specialist Glass's, explains, "The demand is for what we call car-like or retail specification - basically, what you'd find in a car: metallic paint, air-con, alloys, sat-nav - all the usual bits you normally find in top-end Highlines, Sportlines, Custom Limiteds - anything like that is in huge demand. Colour is making a significant difference; the wrong colour won't sell and the right colour will go for a premium."
" The biggest sellers, because there are none around at the moment, are tippers."
Picton says crew vans are also doing well, while at the specialist end of things, Spencer says used-car buyers cannot get enough of tippers. "The biggest sellers, because there are none around at the moment, are tippers," he says. "It's been a short supply all year, and the moment you get them, boom, they're out the door."
It's the same story at BCA, as LCV operations director Duncan Ward explains, "We continue to experience plenty of demand for tippers and dropsides, Lutons and larger panel vans, the latter often going back to work to service the online shopping sector."
In its most recent LCV Pulse report, BCA claimed van prices were up 8.3%, or £511 year on year, at an average of £6,651. "Throughout much of 2017, there has been steady demand for vehicles to service online shopping delivery, the construction and civil engineering industries, and the small business and entrepreneurial start-up sector," adds Ward.
While the best and scarcest stock continues to sell like hot cakes, there remain a portion of used vans that struggle to find homes. High-roof, long-wheelbase vehicles are a hard sell second-hand. Hannah explains, "Long and high is still a challenge to move; I think it's just that they're too big. Most of our vans will probably end up with second-hand operators - plumbers, electricians, joiners - that type of operation.
"The long and high vans are just not what they're looking for. They're too big to get into people's driveways or into small areas where they're going to be working, and if you don't need something that big, then people are just switched off from it completely."
In contrast to the short-wheelbase, retail-spec vans, there is also what Picton describes as a "two-tier market", where low-specification LCVs, normally employed by large fleets, are undesirable. "The base fleet spec - which is typically low horsepower, low spec, in white - will sell, but values are being squeezed," he says.
That said, Picton concedes that similar vehicles from certain well-known companies tend to do well, because the trade is aware that they've been well maintained.
"You do have the exceptions with the ex-utility vehicles - BT, British Gas - which are known to be well looked after, with full service history and quite often a different specification on the vehicle, over and above standard."
He adds, "If you look at a Caddy Maxi, for example, in the specification that VW sells, then you look at a British Gas example - bearing in mind that they come out of the factory ready to go for British Gas, with the extra kit on - they are deemed to be great value for money. Currently, in the UK, we've got quite a few ex-British Gas Caddys going through the used market and, on the whole, they're doing well."
Bucking the downward trend of the new-van market are pick-ups, registrations of which were up 10.1% on 2016 at the SMMT's most recent count. A wider portfolio of products, and the dual business and private appeal of well-specced double cabs, has fostered their popularity, while leasing firm Arval this month claimed that the absence of the now-obsolete Land Rover Defender, formerly bread and butter for many buyers, has created a void filled by pick-ups.
However, these vehicles are becoming victims of their own second-hand success. Perceived desirability has seen them priced unrealistically high, deterring buyers. "Things like the L200, Navara, Hilux - they have been a little bit behind; quite difficult to move," says Hannah. "My thought process would be that they're just too dear."
Examining Ogilvie's recent LCV sales figures, Hannah continues, "Here we've got a 13-plate L200 Barbarian - four-wheel drive, an all-singing, all-dancing thing. It's done about 55,000 miles and it's £10,000 plus VAT - so £12,000 for a five-year-old vehicle. That's why they aren't
"I think people are just not prepared to pay that kind of money for them - especially when you could probably buy a new one for sub-£30,000. A Nissan Navara, a 15-plate in Tekna spec, double cab pick-up, four-wheel drive with 18,000 miles on, is £13,000 plus VAT - that's an awful lot of money for a truck."
As for the future of the used-van market, the supply issues aren't expected to go away overnight. Anecdotally, Picton believes the rental industry may be holding onto vehicles for longer than usual, due to the increased cost of Euro 6 models, which could go some way to accounting for the current scarcity.
"I think there has been a reduction in more of the short-term stock coming in from daily rental sources. The fact that all new vehicles are now Euro 6 - and there is a premium to pay - makes me wonder whether the short-term rental companies are happy to pay that premium for something that is being forced on them," he says.
"An increase in price needs to be put in place to cover the improvements in technology, but I wonder whether some rental companies are saying, 'We're not going to pay this; we're going to hold onto our current stock for a bit longer,' which could explain why there's not so much coming through to the used market now - but that's only my guess."
Overall, it's looking like more of the same for 2018, though. "We keep saying that volume's got to start coming back sooner or later, but it hasn't seemed to be the case this year," adds Picton.
"The used market will still be strong in 2018. There's plenty of good stuff out there, which will obviously have an affect, and discounts on new vans will impact the late-year stock. I can't see it being any difficult really to the way is at the moment."
"It's just a matter of when volumes return," adds Spencer. "Some companies have, just to get things renewed, been turning year-old or six-month-old vans, where predominantly the market has been three-year, 60,000-mile vehicles.
"So the buyers have had to adjust - and so have the auctions, in all honesty, because there's only a certain number of people who want that early plate stuff. It's a bit pricier, but you've got a choice - you can spend £12,000 on one van or you can buy three vans - and there's probably going to be more profit in three.
"But if this drought continues, then I'm guessing that the old vans will start materialising again."