Cap slashes RVs
11 November 2008
Residual value expert Cap has announced its biggest ever downward revision of forecasts as pressure on used car prices begins to bite.
"We've never undertaken anything like this before because the market has never changed as unexpectedly, rapidly and significantly as it has this year," said a Cap spokesman.
"A general re-forecast such as this is a very significant development and one that we undertake only with great care and robust evidence on which to base it," said Cap forecasting manager Jeff Knight.
The re-forecasting has Cap staff working evenings and weekends to complete it in time for the December Cap Monitor book as the process involves individually assessing and revising 1200 model ranges.
Cap has been watching the market for some time but feels the new-found stability in the banking sector has led to clarity in terms of future economic prospects.
"With the near certainty of a recession now independently established and acknowledged by the Prime Minister and Chancellor, the decision was taken to undergo a significant re-forecast," said Knight, who is also warning the downward shift in pricing could only be the start: "We continue to keep a close watch on the developing economic picture and it should be further noted that on-going re-forecasts beyond December cannot be ruled out."
Cap is predicting that values will continue to slide through to at least next summer before stabilising. "Therefore future residual values at 12 months and beyond will almost certainly be subject to further downward revision," Knight said.
The firm is also warning there will be no discernable climb in residuals, with any boosts after the predicted settling of next summer coming from new entrants to the sector rather than improving market conditions.
Declining values were already being felt in the auction hall last month, where BCA reported a new low for average values through its sales.
The fleet and leasing disposals in October averaged £5724, down £133 on September and a huge £1005 fall on October 2007. That's despite the cars averaging nearly a month younger and 1500 miles less than October 2007.
"The market is experiencing the sort of conditions that can promote extreme short-termism amongst professional buyers," said BCA's Tony Gannon.