Paul Barker's blog - 31 May: Over-exposed on RVs?

Date: 31 May 2016   |   Author:

Experts on the VRA Q&A panels were in agreement that a hard landing was unlikely because the used market is one of the few truly free markets. The remarketing business handles massive volumes of cars daily. However, there was also a consensus that the current volumes of new cars being pushed into registrations, often without an end customer, will have an impact on the used car market eventually.

Already there's talk that franchised retailers are sending end-of-term cars back to the finance house because they don't like the price - only to pick up the same cars for a cheaper price, later, when they get to auction. There was also the view that there is a downward pressure on used car prices in general and there was some talk of a "readjustment".

While fleets that lease vehicles may be insulated to some extent from a readjustment in prices, the lease firms and any fleet on outright purchase could be hit significantly if their residual value forecasting isn't robust enough to cope with a fall in prices, even if it isn't a crash.

One panellist even went as far as to reference the RV write-downs that the lease firms had to make at the turn of the century. These write-downs ran into the millions, and caused those that hadn't set RVs correctly some big headaches. Let's just hope that when the RV fall comes this time, lease firms haven't written rates that aren't financially robust.

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