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Car Market Overview September 2019

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New Car Sales

According to figures produced by the SMMT, the new car market was down 4.1% in July, with 157,198 cars registered, compared to 163,898 in the same month last year. Year-to-date, 1,426,443 cars have been registered, a reduction of 3.5% on the same period in 2018. There was considerable registration activity in the last few days, again pointing towards a chase for volume and market share rather than satisfying natural demand.

Capture 1Source: SMMT

Registrations of diesel cars continued to drop – a decline that has been happening since the beginning of 2017. They were down 22.1% in the month, 19.7% for the year-to-date. Petrol car registrations did increase, by 2.6% (mild hybrids included in the figures), but the biggest increase was seen in the alternatively fuelled sector. This was driven by pure hybrids and battery electric vehicles, with the latter increasing by 158.1%, resulting in a 1.4% market share, the highest ever monthly share for BEVs. Plug-in hybrids continued to decline, down 49.6%. 

Capture 2Source: SMMT

Daily Rental registrations declined in July, the second month running this occurred, down by 12%. Year-to-date, registrations are up 3.3%, but there does seem to be some focus taken off this area by certain manufacturers. There were some interesting figures posted in the month – Volkswagen, Mercedes-Benz and Toyota joining Vauxhall and Ford in the top 5. Year-to-date, Vauxhall continue to register the most cars in this sector, but the interesting dynamic continues to be the premium German brands of Mercedes-Benz and BMW increasing their volumes. How the used car market soaks up these cars when they appear for resale will be particularly important for these brands future values.

Used Car Retail Activity

Despite the school holiday period, retail footfall, enquiries and sales have all increased in August. It appears that after a downturn in fortunes since April, the retail market has picked up and returned to more “normality”, despite the potential threat of some economic upheaval in the coming months. Some of this upturn is certainly due to retailers working hard to woo consumers back, with competitive price points and in some cases heavier reductions off advertised prices than previously. The continued downward movements in trade prices over the last 9-months have allowed retailers to now buy for less and reduce what the consumer has to pay, whilst maintaining a profit. Average trade prices have dropped by over 10% in the last 5-months.

One of the main areas of success in August has been with increased demand for smaller, price-point cars, particularly city cars and superminis. Over the past 12-months these were the cars whose prices have dropped by the most in percentage terms, having previously risen in price in many cases, during 2017 and 2018. Franchised dealers, independents and car supermarkets alike have all similarly benefited from this demand in recent weeks. In general, petrol cars have been more sought after than diesel too, although this is size and model dependent. Whilst it is too soon to suggest an anti-diesel rhetoric by the used car buying public, fiscal policy and clean air zones that charge for pre-Euro 6 diesels are having an impact on the fuel of choice.

Recent profit warnings from some franchise dealer groups mean that this gentle upturn in fortunes is particularly welcome and the anecdotal feedback received during the month has been more positive than it has been for the majority of the year.

Used Car Remarketing Activity

This increased consumer activity has resulted in a welcome upturn in demand in the wholesale market.

Auction attendance levels, either online or in person, increased in August, again despite it being the holiday period. Many franchised dealers have been conspicuous by their absence over recent months but in August we have seen much more of a mix of buyers, from all areas of the retail market. Elsewhere, vendors that do not use the auctions, preferring to sell direct, also reported higher levels of buyer engagement.

The more reasonably priced end of the market saw cars in demand the most – with those in excess of £20,000 still being difficult to move, maybe due to the prevalence of pre-registered and ex-demonstrator cars already being on forecourts, from the tactical registration activity of certain premium brands.

How does trade demand compare to the previous month?

Capture 3

Half of all respondents reported that demand increased during August, a huge increase compared to last month and evidence of a more stable used car market. There were still some reporting a downturn, but certainly the overall sentiment was positive.

How do your current stock levels compare to the previous month?

Capture 4

Stock levels either stayed level or decreased slightly for most auction companies – this led to more of a mix of cars being sold. Those offerings that previously sat on the shelf, particularly older, high mileage cars, were now selling, albeit at lower prices than the vendors desired and expected a few months ago, but at least this stock was moving.

How do conversion rates compare to the previous month?

Capture 5

With slightly reduced stock levels and higher demand, comes the inevitable increase in conversion rates. As the auction survey results highlight, fewer sites reported conversion rates dropping than last month and almost half stated that they had improved. Those green shoots of recovery that have been mooted over the last couple of months finally seem to be growing. Conversion rates upwards of 90% being reported, although the exception rather than the rule, are an indicator that the market is recovering. Conversion rates in the 70-80% area were certainly not unusual and a far cry from recent months.

Used Car - Trade Values

With supply and demand much closer matched, prices remained much more stable in August. Analysis of daily live sales prices by the cap hpi Valuations Editors led to an overall drop, at 3-years, 60,000 miles, of just 1.0% in the month – the smallest movement down since March (leading to April’s monthly values for those still subscribing to monthly products).

Whilst this downward movement in August 2019 was still the biggest drop in that month since 2011, this should not be viewed as a negative – the market is stabilising after a tumultuous few months.

The red bars in the graph below illustrate just how volatile the market has been – each month this year has seen values drop by more than the same month last year. Indeed, with the exception of January, which is in fact based off the Live figure at the end of December 2018, each month has seen a drop in excess of the same month in the previous 3-years. Used car market pricing realignment has been ongoing since the end of 2018, accelerating from Easter onwards.

Monthly Value Movements at 3-years, 60,000 Miles

Capture 6

Looking at specific sectors of the market, superminis (Corsa, Fiesta, Polo size) hardly dropped in value at all, -0.2% at 3-years, 60,000 miles equating to an average of less than £10. This is a direct result of that aforementioned demand for smaller, petrol cars. There was also some strength seen in cars with an automatic transmission in this sector– a theme likely to continue; examples being the Ford Fiesta, Nissan Micra and Toyota Yaris. City cars dropped by slightly more than superminis, but this -0.9% only reflects an average of around a £40 drop.

Upper medium cars have reduced by the most of any mainstream sector, a 1.6% average drop equating to c.£160 in monetary terms. This size and shape of car has waned in popularity but demand and supply have been better matched than other sectors over the last year, so prices have not dropped as much over this period. That may well be correcting itself now. Some models that dropped by more than the average were generally diesel variants, in particular the Audi A4, Kia Optima and Toyota Avensis, although some petrol models were also not immune to price drops (Ford Mondeo and Vauxhall Insignia being two mainstream examples).

SUVs dropped in value by an average of 1.0% or c.£120 at 3-years, 60,000 miles. This was a much lower drop than has been evident over recent months and these cars remain front and centre of customers purchase decisions. Some models, such as the latest plates of the BMW X6 Diesel, the Citroen C3 Aircross Petrol and the Kia Niro even increased in value as demand outweighed supply at long last.

Looking at fuel-types, once again average diesel car values dropped by more than their petrol counterparts (-1.1% compared to -0.8% at the 3-year point), this being the continuation of a theme in 2019. Diesel values are not dropping off a cliff but they are under more pressure than they were last year and under more pressure than petrol cars.

Values of electric vehicles remain difficult to summarise, with little set pattern.   Values for both the Hyundai Kona Electric and Kia E-Niro have risen to reflect the limited available volumes in the used market and extended lead times when ordering from new.  Of the volume models, the older Nissan Leaf continues to be under pressure in the wholesale market as choice remains plentiful, plus the newer model is more popular due to the additional battery capacity. Both the Jaguar I-PACE and Volkswagen Golf Electric have seen a reduction in values as pressure from late-plate (tactical registrations or ex-demonstrators) retail offerings has impacted genuine used cars price performance.  We continue to see an increase in disposal volumes, up 46% year to date over the same period last year – supply and demand both increasing but at varying degrees for different models.

What Next?

With the stability that has been witnessed in August, it is likely that a corner has been turned for the used car market, after some difficult months.

The next few months are not without their challenges, however. With the next phase of WLTP (Worldwide Harmonised Light Vehicle Testing Procedure), namely RDE2 (Real Driving Emissions), coming into play in September, whereby cars have to reach emissions targets in real-world driving conditions rather than laboratory testing, there could be some uncertainty in the new car market. This is not expected to be anywhere near as marked as for last year’s initial WLTP deadline and unlikely to influence used car prices.

The revised Brexit deadline of 31st October is also looming ever-closer and the impact of this on the UK car market is still an unknown. We do not envisage anything untoward affecting the used car market and as the leading forecaster of values, we have a responsibility to act only when outcomes are known.

September is generally a month when used car values are relatively stable, the average Live value movement at 3-years, 60,000 miles over the last 5-years has been just -0.2% during September. With the market stabilising and the back end of August even seeing some strength, we are not predicting large movements during the month. Indeed, it is likely to be the most stable month of the year so far, all things considered.

Over the course of 2019 thus far, cap hpi’s Live valuations have been an invaluable reference point and source of information for vendors and buyers alike. Whatever happens in September, there will be different models prices moving at different rates and in different directions, so an eye on the detail is essential for anyone buying or selling vehicles.

black book September 2019 - Average Value Movements

 

1 YR/10K

3 YR/60K

5 YR/80K

City Car

(0.9%)

(0.9%)

(1.2%)

Supermini

0.2% 

(0.2%)

(0.9%)

Lower Medium

(0.4%)

(0.6%)

(0.7%)

Upper Medium

(1.6%)

(1.6%)

(2.0%)

Executive

(2.1%)

(1.5%)

(1.7%)

Large Executive

(2.0%)

(1.4%)

(1.1%)

MPV

(1.1%)

(1.1%)

(1.5%)

SUV

(1.0%)

(1.0%)

(1.5%)

Electric

(0.1%)

0.4% 

(0.2%)

Convertible

(1.7%)

(1.5%)

(2.1%)

Coupe Cabriolet

(1.8%)

(2.2%)

(2.0%)

Sports

(0.7%)

(0.7%)

(0.7%)

Luxury Executive

(1.6%)

(1.9%)

(1.9%)

Supercar

(1.0%)

(0.5%)

(0.6%)

Overall Avg Book Movement

(0.9%)

(1.0%)

(1.4%)

( ) Denotes negative percentages

Notable Movers 1yr 20k

GENERATION NAME

MIN £

MAX £

AVG £

AUDI A6 (11-19) DIESEL

-300

-150

-230

BMW MINI ONE (14-18)

150

250

190

BMW X3 (10-18) DIESEL

-600

-100

-261

FORD FOCUS (11-18) DIESEL

-200

-100

-122

MAZDA 6 (13-18) DIESEL

-550

-250

-432

SKODA OCTAVIA (13- ) DIESEL

-500

-300

-384

VAUXHALL MOKKA (12- ) DIESEL

-550

-200

-283

VOLKSWAGEN PASSAT (14- ) DIESEL

-550

-300

-434

VOLKSWAGEN POLO (09-18)

100

150

124

VOLVO V40 (12- )

200

300

240

Notable Movers 3yr 60k

GENERATION NAME

MIN £

MAX £

AVG £

AUDI A7 (10-18) DIESEL

150

200

160

LEXUS IS (13-19) HYBRID

-600

-250

-321

MAZDA 6 (13-18) DIESEL

-325

-175

-272

MERC E CLASS COUPE (13-17) DIESEL

250

300

281

NISSAN LEAF (10-18)

-525

-350

-430

NISSAN QASHQAI (13-18)

-250

-150

-181

PEUGEOT PARTNER TEPEE (08-18) DIESEL

-325

-150

-215

SEAT IBIZA (12-17)

-375

-200

-269

VAUXHALL ASTRA (09-16)

-225

-150

-188

VOLKSWAGEN PASSAT (14- ) DIESEL

-400

-225

-293

PDF Download For Test Editorial
Derren Martin

Derren manages the valuation process for current used car values at cap hpi, which includes managing a team of 6 Car Valuations Editors who analyse around 170,000 individual sold trade records each month from a wide variety of industry sources, plus 700,000 retail adverts that are reviewed daily. Derren and the team also engage in market insight discussions with various auctions, leasing and rental and remarketing companies and vehicle manufacturers throughout the month as well as offering consultancy on the new and used car market. 07436 817 383 Derren.Martin@cap-hpi.com