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WLTP could make used car market unpredictable, VRA warns

Date: 20 July 2018   |   Author: Sean Keywood

The new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) could lead to unpredictability in the used car market towards the end of this year and into 2019, according to the Vehicle Remarketing Association (VRA).

WLTP is replacing the old NEDC system for testing fuel economy and emissions, with the aim of producing figures which are more representative of real world driving.

All new vehicles are now undergoing the test, but the new figures will not be adopted fully for tax purposes until 2020.

However, NEDC-correlated figures converted back to resemble the old testing regime will be adopted from this September.

The VRA says the potential effect of this is twofold.

Firstly, as many manufacturers are yet to publish correlated figures, many company car drivers are holding on to their old cars for longer, until there is greater certainty about how much tax they would pay on a new one.

Secondly, there is currently very limited availability of some models because manufacturers are altering their production schedules, which the VRA anticipates will mean longer manufacturer lead times once all the correlated figures are released due to pent-up demand.

VRA chair Glenn Sturley said: "What these factors mean is that the normal sale and purchase of cars is being affected.

"Fewer company cars are being defleeted at three and four years, as usual, because employers and drivers are choosing to hold onto them until there is greater certainty surrounding the amount of tax they will pay.

"Similarly, even some who want to move out of their current car into a new one that has good MPG and CO2 figures under WLTP are not able to do so because the waiting times for some models are running into several months or even a waiting time of 'we don't know'."

Sturley said this meant a glut of cars was being built up which could be released on to the used market quickly.

"As more information on tax becomes available, many drivers and employers may place an order for a new car immediately and others are likely to do so in a short period of time," he said. 

"Also, the supply situation may suddenly improve. When manufacturers change their production choices, it is a little bit like turning around an oil tanker.

"They take a while but once the momentum shifts, supply will suddenly jump upwards, and this again may lead to a glut of used cars hitting the market in a relatively rapid fashion."

Sturley explained that the main problem surrounding these issues was the large degree of unpredictability - and that popular company cars could be especially affected.

"We know that manufacturers have to make their WLTP figures available by September but we don't know how quickly people will defleet in response," he said. 

"We could also make plans if we had a clearer picture about manufacturer production.

"However, there simply isn't much information to hand and this could mean that, around the likeliest timescales later this year and into 2019, we could see a quite unusual looking new car market, with large amounts of stock becoming available at once.

"The used car sector is currently performing very well but if oversupply will always hit values.there is every chance that we could see some weakening among popular company cars especially."