It’ll come as no surprise that this opening paragraph will contain the word ‘Brexit’.
When compiling this annual review at this time last year we were roughly on track for an exit from the EU by 29 March. There was still a lack of clarity as to what this might bring, but many could be forgiven for thinking that by the end of 2019 things would have become a little less uncertain.
Little did we suspect the political turbulence ahead.
The used van market is driven ultimately by consumer demand for goods and services. Economic confidence and stability are crucial to maintain this appetite, and in the past 12 months the consumer couldn’t be blamed for reining in spending, thus reducing demand for used vans to supply their products and leading to a tightening of the belt by the used van trader, keen to maintain his cash flow and reduce his exposure to a weakening market.
To throw another factor into the melting pot, the introduction of the Utra Low Emission Zone (ULEZ) in central London last spring (and the planned introduction in many other towns and cities) may well be a double-edged sword for the used van trader. While van operators may want to upgrade to a Euro6 vehicle to avoid charges, therefore stimulating the relatively late-used sector, the supply of non-compliant vans in these areas will rise coinciding with a lack of demand.
The new van market tends to track GDP and as a consequence consumer confidence. While new van registrations have remained generally buoyant and close to record levels, the latter part of the year has seen a declining trend. Some of this can certainly be attributed to registrations generated by changes in legislation (such as the Worldwide Harmonised Light Vehicle Test Procedure – WLTP), but there is a feeling that a weakening is becoming apparent. But has this change in mood been replicated in the used van sector?
Encouragingly, market-leading auctioneer BCA reported average used values were up by more than 3.0% year-on-year as we headed towards the end of 2019.
Tim Spencer, commercial vehicle sales manager of Shoreham Vehicle Auctions, has sensed a change in the last few weeks of 2019: “The used LCV market ended the year slightly less frantic than the rest of 2019, but generally demand was strong from buyers, and both lower-mileage ex-rental stock and 100,000 miles-plus vans with a full service history have been finding buyers at good prices.”
Citing how confidence may not have been affected to a great degree, Spencer adds: “Other than a few weeks in the summer where the market slowed down, demand has been strong during 2019. Traders have been buying stock to feed the increasing number of SMEs who are growing their businesses and are sourcing extra vehicles or replacing their current ageing vehicles. The market for the ex-rental 18-month old van has been very strong all year.
Whereas SMEs may have spent £7,000-8,000 on a used van three to four years ago they are now investing £10,000-15,000, which has further supported demand and prices in this sector of the market.”
Geoff Flood, auction company Aston Barclay’s commercial vehicle sales manage, also reports a healthy year, but with subtle changes in the age/mileage of vehicles being presented for sale, which could help satiate the appetite for Euro6-compliant vans.
He says: “2019 has been a strong year for used vans at auction with prices averaging above £4,300 across all quarters. We have started to see a change in stock profile coming into the auction over recent months. Used vans are generally younger and with fewer miles on the clock, which may signal a change in fleet replacement cycles as well as vehicles travelling fewer miles.”
Shoreham reported strong demand in 2019
(Continued from page 1) Flood highlights some particular strengths that have been noticed: “Combi and high-roof vans have seen high demand in the year, as have higher-mileage vans with full service histories. Double-cab pick-up prices continue to rise. These are both workhorses and recreational vehicles and have a strong following in the used market. Corporate users are replacing these vehicles more often, probably because new prices and deals are very keen, and residuals remain strong.”
Steve Botfield, CV editor with automotive data experts Cap HPI, has seen little evidence of any lack of trade confidence: “In a year that can only be described as unpredictable with the political turmoil of the UK leaving the EU and an economic situation that has left businesses in limbo, we could have expected a depression in the sale of both new and used LCVs. However, the year panned out differently … due to several factors. The introduction of the London ULEZ and WLTP from January to August saw a record number of new vehicles registered from all sectors.”
Botfield continues: “As we moved into the final months of the year the new registrations tailed off and used buyers were able to pick and choose from a ready supply of vehicles. However, the demand increased, which could be partially linked to the reduction in new registrations we saw in the same period.
“During 2019 we also witnessed the demand increase for used electric LCVs, with a large defleet of vehicles from a utility firm which saw the guide values for electric vehicles (without leased batteries) increase by over 10% by the end of the year based on a three-year-old vehicle.”
Also noticing a rise in demand for used vans in the latter few months of the year, Andy Picton, chief commercial vehicle editor at valuation providers Glass’s, says: “Average sale prices in the wholesale market were strong at the start of the year, but came under pressure as more volume became available. As a result, average sale prices fell by over £1,000 during the first eight months of the year and first-time conversion rates tumbled as buyers cherry-picked the best examples.
Prices paid have recovered during the last quarter, as supply and demand have levelled up.
Over the year, average mileages of those vehicles sold has increased dramatically from [around] 63,000 miles to 77,500 miles. Greatest demand in the wholesale market continued to be for vehicles in the light van sector (Citroen Berlingo, Ford Transit Connect, VW Caddy etc.) and the medium van sector (Ford Transit Custom, VW Transporter, Renault Trafic/Vauxhall Vivaro etc.) and regularly make up between 60-70% of all sales. Crew vans generally have been particularly good news.”
So where does this leave us in 2020? We have a new government with a strong majority, and a virtual certainty that Brexit will happen. Cap HPI’s Botfield says: “The introduction of more ULEZs will drive further demand for Euro6-standard vehicles for those businesses who have not yet switched.
“Supply of new vehicles will be paramount if business confidence returns now that the political situation has become more stable. If the new stock is not available, it will only improve the values of used vehicles.”
Glass’s Picton errs on the side of caution: “Economic uncertainty will continue into 2020.
Supply and demand will be a continuing factor, with the best stock seeing values remaining firm and the most poorly presented, or those high-volume models, coming under further downward pressure. Introduction of further clean-air zones during 2020 could see older stock start to come under greater pressure.”
