Buyers are beginning to see more choice in the auction halls but which models will be most in demand? James Dallas investigates.
As we head towards the end of 2015 there are indications that used van values are beginning to soften following a prolonged period of growth.
According to BCA, average values at the three-quarter point of the year were £151 down on where they were last year at £5507.
“We commented earlier this year that values were likely to come under pressure during 2015, as a result of rising volumes, an increase in poor condition vehicles and the strong new van market,” remarks Duncan Ward, BCA’s head of Commercial Vehicles.
“This was evident with a flattening of values over the summer period and year-on-year value growth slowing.”
Ward explains that throughout 2012, 2013 and 2014 average used values climbed steadily, with month-on-month and year-on-year growth becoming the norm, due to the shortage of good quality retail stock and rising demand in an improving economy pushing up prices over an extended period.
Ward adds: “Of course, that was never going to be sustainable indefinitely, and we are now seeing the return of more typical market conditions with balanced supply and demand and elements of seasonality taking effect. The good news is that the market has maintained relatively strong average values across the board and there is plenty of interest from buyers for well presented, good quality commercial vehicles. Average values improved in September and there was plenty of buyer demand during the month.”
With rising volumes of stock now flowing into the used market as a result of new van sales picking up in the economic recovery over the last three years the trading climate is likely to become more favourable to buyers going into 2016.
Valuations specialist My Car Check Trade expects used values to taper off as we head towards the turn of the year but says the best quality examples will continue to attract good returns.
“For October, we pulled most van values back very slightly as we head into winter,” says head of valuation services, Gavin Amos. “As always, the gems will buck the trend.”
But Matthew Davock, head of LCVs at Manheim Remarketing, doubts that increased supply will lead to weaker used van values in the short term. He expects a rise in de-fleet volumes to hit the market midway through the final quarter of 2015 and admits: “Seasonality and slow retail sales will temper demand.”
However, he claims: “There is still a chronic shortage of vans.”
Jayson Whittington, Glass’s Guide’s CV manager, takes a different view. He says the knock-on affect of the yearly increases in new registrations has been “double digit percentage rises annually in auction volumes”. While Whittington says this has led to a slight weakening in values, he argues that it will be conversion rates that suffer the most pressure as supply begins to outstrip demand.
“This trend is likely to continue in 2016, but as long as reasonable retail activity continues then values should not weaken substantially,” says Whittington.
He says the most desirable light commercials coming to auction are those that have the capacity to carry passengers.
“Kombi style units currently attract significant premiums,” he claims.
Otherwise he says the bodystyles commonly found operating in the construction industry, such as tippers, are becoming increasingly sought after. Despite Volkswagen’s travails with the diesel emissions scandal, Whittington says the enduringly popular Transporter continues to attract strong values and adds that it is too early to judge whether this will alter over time.
But My Car Check’s Amos sees few clouds gathering on the horizon for the model that is a favourite base for camper conversions.
“Transporter continues to outperform the market and that isn't set to change,” he predicts.
Whittington says volumes of Ford Transit Customs, the UK’s best-selling van, on the auction circuit are growing steadily but still attracting a decent following despite the prevalence of basic specification, white vans on offer.
BCA’s Ward stresses that an LCV’s condition and feature list have more bearing on its value prospects than any buyer prejudice towards particular badges.
“Irrespective of brand, any unusual or well specified light commercial is likely to make a premium in the current market and high mileage is no deterrent providing the condition and presentation is good,” he says.
Manheim’s Davock has a similar view:
“High specification vans with air conditioning, metallic paint and satellite navigation are in very high demand and vans in the following segments are generally desirable: 4x4 pick-up, lifestyle, Luton, 15-seater minibus, and CDV vans with the three-seat option in the front.”
The most important consideration for dealers, Ward emphasisis, is not having to spend time and money in getting vans ready to display on the forecourt and with supply increasing, this factor is becoming more prevalent.
“Professional buyers will always be interested in ready-to-retail vehicles and the gap between the best condition and worst condition LCVs is widening when analysing average price performance,” he points out.
Although a political bandwagon has started to roll against diesel vehicles, and in particular against the harmful health effects of the NOx emissions they produce, Whittington foresees little chance of operators making a wholesale switch to petrol LCVs unless the introduction of legislation forces their hands.
“Unless the Government implements a measure that will penalise businesses for using diesel vehicles I think it is unlikely that there will be any great shift in petrol registrations,” he says. “While petrol is back in favour, it doesn’t currently offer the increased MPG performance that diesel does, and fuel economy tends to be a higher priority than environmental concerns.”
Tim Spencer, commercial vehicle sales manager at Shoreham Vehicle Auctions agrees that cost considerations will rule out a swing back to petrol vans.
“This is unlikely to happen, due to the miles that the average van driver covers in one year,” Spencer says.
“Put simply, emissions aren’t at the forefront of a van driver’s mind, rather how much it will cost at the pumps and fuel economy.”
Whittington goes on to say the performance of electric vans in the used market depends upon whether the battery is included in the sale or subject to a separate lease agreement.
“We have seen examples where buyers were expected to sign up to a monthly lease agreement following the hammer falling. This practice confused trade buyers and was reflected in poor performance as a consequence. More recently we have seen vehicles sold with batteries included and they fared much better,” he explains.
Looking forward, however, he does not see a rise in demand for plug-in vans because, he argues, consumers remain unconvinced by the business proposition.
Ward shares Whittington’s misgivings about electric vans, particularly with concerns over ownership if the battery is leased. So long as the numbers of EVs coming into the used marketplace remain low, he says it will remain difficult to get an accurate idea of value and predicts: “Buyers will inevitably err on the side of caution when it comes to bidding.”
Ward argues that the benefits to the first owners of electric vans as a means to broadcast their environmental credibility do not translate so well into the used market and asks: “What incentives are there for the average self-employed tradesman or small business to choose electric?”
“Electric vans are perceived as being “complicated”, with lots of unknowns in terms of servicing, battery life, range and reliability,” he claims.
“Generally, the used buyer wants a reliable cost-effective transport solution for their business, not to make statements about their green credentials.”
Shoreham’s Spencer says EVs have had little impact on the used market but reckons this could change when the sector’s frontrunner, the Nissan E-NV200, starts to appear in larger numbers in about 18 months time.
Manheim’s Davock also has a more positive take on EVs. While he acknowledges the initial wave of plug-in vans, which appeared in the first decade of the century and were largely designed by converters with a varying degree of manufacturer backing, were beset with cost and reliability problems, he claims the second generation is a “different proposition” that will make its mark in auction halls in 2016.
“To ignore these vans, and the contribution they will increasingly play to the economy, would be foolish,” Davock warns. “We are launching the e-NV200 in open auction in October, and have produced an accompanying fact sheet to educate wholesale and retail customers.”
Following a record number of van launches in 2014, anecdotal evidence suggests lead times have stretched to breaking point. The knock-on effect could be an overheated nearly-new van market, according to Manheim.
Finally, with many businesses investing their profits in new vans in the run-up to their financial year-ends, the ex-fleet stock is pushed into the wholesale market. This should see the trend for busy first and last quarters of the year continuing for the foreseeable future.