As we approach the end of another year of high levels of, now stabilising, new van registrations, it’s time to ask whether the used market performed well and as expected.
The auction houses certainly think so. Here’s the view of BCA’s LCV operations director Duncan Ward: “Both professional buyers and end users have been bidding confidently across a range of makes, models and configurations this year with lots of competition for LCVs that are in ready-to-retail condition. Values for the best examples will outstrip price guide expectations by a considerable margin.”
James Davis, director of commercial vehicles at Manheim, adds: “2017 has followed the pattern of the last two years with volume de-fleets in Q1 and Q4. This year we enjoyed record Q1 volumes.
“Summertime seasonality was definitely observed in terms of softening values; however, [sales] conversions didn’t noticeably dip as vendors moved to the market.”
Andy Brown, MD of CD Auction Group, concurs: “We expected strong demand and, in general, this has come to pass. The volumes and prices have been strong with well-specified vans achieving good prices. The market for one- to three-year-old vans has been very strong this year.”
Vendors also seem to think the year has at least met expectations, although Julian Pullen, UK head of trade sales and purchasing for Van Monster, suggests that apparent performance against the valuation guides could be misleading.
“2017 has been better than expected with auction prices holding up very well, particularly when measured against guides,” he begins. “There are a number of contributing factors including the lower entry numbers, but also two distinct ones, which you can hang your hat on.
“Firstly, the continued increase in coloured and non-standard spec vans in the marketplace. Cap-HPI states that their values are for white [vans] with no extras.
“Secondly, the proliferation of online competitive bidding… already represents a bigger percentage of sales than in the car arena, where the initial uptake for online sales was much earlier.”
Dylan Thomas, auction manager for Hitachi Capital Vehicle Solutions, adds that in 2017 the firm witnessed its largest defleet and sold 37% more auction volume than in 2016. “Demand is exceptionally strong,” he claims.
Guiding lights
Valuation guides have also been reflecting on 2017. Andy Picton, chief CV editor at Glass’s, expects the new market in particular to stabilise. “The record registrations of the last few years couldn’t be maintained, and with the uncertainty of Brexit levels were expected to fall,” he says.
Picton suggests there may be a changing dynamic in the used arena.
“The open market continued where 2016 left off, with strong money being paid for the best of the used stock. The early indications we saw during 2016 of a two-tier market split between ‘car-like’ spec and the more basic ‘fleet spec’ has continued to develop, whilst the 4×4 sector has come under increasing downward pressure,” he says.
Cap-HPI’s senior editor of CVs, Steve Botfield, says its sales data indicates that 2017 has been thriving: “Our research data shows an increase of 8% in sold vehicles from January to August 2017, when compared to the previous year. Comparing our research data against LCV registration history for the four largest vehicle sectors, only the large van sector in 2017 has seen a reduction in used volume (-1%) when compared to the previous year.”
Given the massive rise in new registrations over the past few years, many close to the industry expected the auction halls to be flooded with de-fleeted vehicles leading to a serious over-supply situation and a consequential freefall in values, with the used market being unable to absorb the vehicles on offer. This, however, doesn’t appear to have happened. Auction entries have reportedly eased over the year and in some cases stock shortages have been reported, keeping both prices achieved and first-time conversion rates high for the vendors.
Speculation is rife that customer contracts on existing vehicles are being extended, or that vendors are utilising other routes to market to control the level of vehicles seen at auction.
Glass’s Picton sees credibility in both these suggestions:
“There is an element of contract extension going on, but I also believe there is plenty of stock being held in readiness, which, as this feeds through to the open market, will hopefully see prices ease.
“We are also seeing more vendor e-auctions starting up, which is keeping volumes at auction at a sensible level.”
Van Monster’s Pullen elaborates on the theory that vendors are seeking new and direct routes to market: “We have recently launched our own Van Monster E Auction facility, which has been very successful. Vans are sold remotely via a bidding platform with a suite of pictures available on each van and a no-quibble sale cancellation agreement if it is not as described. Other vendors will be doing the same as the technology makes it easier to reach your market.”
Manheim’s James Davis takes a broader view: “Certain vendors are enjoying higher/lower volume de-fleets from their van operator clients depending on van replacement cycles. I don’t believe contract extensions are the main driver, certainly not formal extensions.”
He adds: “The make-up of the market sees three distinct categories: daily rental/flexi rent, which are younger but with varied mileage profiles, tending to travel higher average annual mileages; the second category is the contract hire lease van, which is typically three to five years old; the third – own-account fleets, including utilities, local authorities and councils with product up to and over 10 years of age.
“This blended mix offers something for all budgets and ensures any one year’s new van registrations doesn’t hit the market at one point in time.”
BCA’s Ward says his company has seen little sign of lower entry numbers, but that values remain robust .
“BCA has seen record levels of entries in 2017, a result of business retention and acquisition in the important corporate sector,” he says. “A number of auction centres around the group have posted record sale volumes. We’ve just opened expanded facilities in Manchester and plan to go twice a week with LCVs in the north west due to the demand.”
With almost unprecedented, price-led marketing from manufacturers keen to raise or retain market share, new or pre-registered vans are being advertised with extremely competitive cash prices or lease rentals. This is putting pressure on those involved in remarketing ‘late-plate’ used LCVs.
CD Auction’s Brown recognises this: “This is very much linked to short-cycle PCP [personal contract purchase] volumes.”
Picton concurs: “The PCP/PCH [personal contract hire] route to market is growing in popularity. This is known by the trade, which means they are less likely to offer ‘guide’ money for any late-year stock offered at auction.”
Davis adds: “I would suggest it is only pre-registered stock that could impact nearly-new used demand. Only long-term volume discounting to gain significant market share can lead to a softening of used values.”
Davis offers his own observation on the recent ‘scrappage’ schemes: “I don’t believe the initiatives will make a needle-moving impact on retail sales. Despite the previous scheme being a Government-backed initiative, ‘scrappage’ vans this time, as last time, will be taken off the road permanently rather than sold back into the open market by manufacturers.”
So, what’s in store for the market 2018?
Dylan Thomas, auction manager, Hitachi Capital Vehicle Solutions: “We foresee demand and supply will remain in balance. There will be peaks and troughs of supply in the overall market as seen in previous years.”
Andy Picton, chief CV editor, Glass’s: “I believe volumes at auction will inevitably have to rise and values will soften for all but the very best examples.”
Andy Brown, MD of CD Auction Group: “Any further weakening of the sterling/euro exchange rate and worries around Brexit could have a negative effect.”
James Davis, director of CVs, Manheim: “I suspect 2018 will be another buoyant year. I don’t see oversupply as an issue in the next two years. Government is committing billions to infrastructure – road, rail; all need CVs.” Davis says only a serious downturn in the economic cycle could destabilise new and used markets.
