In this annual feature we reflect on the past year and try and predict what might happen in the next 12 months. But, for the past three years or so we’ve been unable to factor in some unpredicted major global events, which have had a dramatic effect on the new and used van markets. Covid-19, chip shortages, a war in Europe, energy prices and a tough economic climate have all conspired to make forecasting an almost impossible task.
Julian Pullen, senior editor, commercial vehicles at valuation provider cap-hpi was hoping 2022 would see a welcome return to normality.
But he comments: “It wasn’t long before the dark clouds of war started to gather and we were plunged back in to the prolonged economic uncertainty we had already suffered during the pandemic, but with a myriad of different forces at play.”
Reflecting on how the halcyon days of exceptional values were soon to become history, he adds: “As we reached the end of 2022 it was evident that around 19% of the average 31% made in used vehicle value gains during the pandemic had ebbed away.”
Also observing a weakening market, Andy Picton, chief commercial vehicle editor at Glass says: “We have seen the average selling price fall by £160 compared to a year ago. Retail buyers are more cautious due to the uncertainty of the economy and this has led to the trade seeking out ready-to-retail stock more than ever, stating that pandemic worn vehicles can cost 35% to 40% more to bring up to standard.”
Despite the fresh and ongoing challenges that 2022 presented, many involved in remarketing vans were reasonably happy with their performances. Reflecting on what perhaps was a better year than expected, Alex Wright, managing director of Shoreham Vehicle Auctions cited ongoing stock issues as a factor in propping up the market, with the caveat that condition remains paramount.
“Prices have remained buoyant across 2022 based on a severe shortage of used stock. Bid volumes softened slightly in Q4 based on the challenging economic conditions but demand from wholesale buyers remains strong, particularly on the high-quality NAMA (National Association of Motor Auctions) 1 graded used vans.”
Also suggesting retail buyers are exercising caution, Geoff Flood, national LCV sales manager at Aston Barclay says: “The level of bids fell slightly in the last quarter of 2022 based simply on the overall confidence in the economy. Some SMEs have put off buying a replacement used van until they see how the rise in fuel costs and interest rates is going to impact their business.
“The used van market was very strong throughout 2022 until Q4, when the rising cost of living slowed down demand and prices softened slightly,” remarks Kevin Hall, head of Van Monster Remarketing. “We also saw the World Cup further contribute to slowing the market down but since it finished our retail business has seen a stronger than expected demand for used vans over Christmas and into the New Year.”
Stuart Pearson, BCA COO agreed that the market dynamic had changed in 2022. “It proved to be a very different year from 2021 where practically any LCV would sell for a premium.”
“In 2022, vehicle values remained very closely aligned to condition and therefore the sellers that followed the remarketing basics lead the way in driving optimum price performance.”
Matthew Davock, director of commercial vehicles at Cox Automotive (owners of Manheim) has observed a different pattern during 2022.
“The used LCV market enjoyed a strong second half of 2022, with van prices outperforming the year’s first two quarters, 69% stronger than pre-pandemic 2019 average levels from an average selling price perspective, and just 2% lower than 2021’s record breaking values.”
But once again highlighting how the condition of vehicles presented for sale is paramount, he adds: “Auction buyers are having to invest more to get ‘pandemic-worn’ vans back up to an acceptable retail standard. Of 100 van dealers surveyed, 88% commented that the average spend was in excess of £2,500 per unit to ensure units reached an acceptable retail standard.”
This sentiment surrounding condition was echoed by many of the experts, with cap-hpi’s Pullen’s thoughts being typical. “What is still evident is the yawning value gap between a clean well-presented van and anything that needs work.”
“In recent weeks this is extending to anything that needs parts too, with some delays in accessing run-of-the-mill items, to trim and interior parts which are causing significant problems.”
He adds: “These issues are pushing dealers to increased stocking days and, in turn, to a need for increased retail margins, especially as good quality replacement stock is so hard to come by.”
While some vendors continue with a policy of presenting vans having had little or no refurbishment, there’s little doubt that those who invest in reconditioning will reap the reward in the auction hall, but whether the nett return is greater remains open to question.
Our contributors could be forgiven for being a little nervous when making predictions for 2023, but overall they are pragmatic and realistic in their outlook. Glass’s Picton thinks the fragile economy will have an impact.
“There’s the possibility of a recession. This could lead to buyers looking for more affordable, older stock, but with condition still an important factor.”
Aston Barclay’s Flood sees a familiar factor coming into play. “With used stock remaining limited by the continued global semiconductor shortage compromising new LCV production, prices will remain stable. There is no sign that used volumes will change dramatically in 2023, which will keep prices consistently high.”
These observations are echoed by Shoreham’s Wright. “All the signs from leasing and rental vendors are that they will not see major volumes of used vans coming off their fleets during 2023 due to new van supply restrictions. This is reinforced by some new vans still having nine to 12-month delivery times, which is forcing vendors to extend customer contracts and replacement cycles.”
cap-hpi’s Pullen thinks the outlook for the coming year is less than certain. “Recent weeks have seen increases in the number of new and delivery mileage-registered vehicles being advertised alongside the used examples across the country. Whether these are just speculative purchases or cancelled orders, the increased volumes seem unlikely to result in a flood, and if the current government succeeds in bringing down inflation and stabilising the economy, these vehicles should move into the market over time.”
Van Monster’s Hall believes 2023 will be another year when the market is in short supply of used stock, and does not expect volumes to get back to pre-Covid levels for a considerable time.
Also adding a note of caution, Cox’s Davock suggests there could be another bumpy ride ahead.
“As the UK continues to face economic struggles, I am predicting the wholesale LCV market could be set for further challenges,” although he is of the opinion: “It is currently in a relatively secure position”.
