Part-exchange increase pushes used car prices down

With all the incessant talk about triple-dip recessions in the news you wouldn’t blame hard-working people in our country for hugging a bundle of cash rocking back and forth under their bed shouting: “my precious”, like Gollum from Lord of the Rings. You’d certainly think that no one has any money to splash out on a new car straight from a dealer’s forecourt, but you would be very wrong.

The new car market is buoyant at the moment, which is causing ripples across the used car industry. Black Book Live (BBL), a real-time car valuation trending tool published by CAP Automotive, showed a rise in new car sales and is seeing the acceleration in the number of cars put up for part-exchange by eager buyers looking to get a better deal on a brand-new car.

In turn this is having an adverse affect in eroding used car market values as dealerships are no longer looking to boost their stocks with used cars from auctions and such like. Another consequence of this is that the dealers are sending further part-exchanged cars that they are unable to move on, which is flooding the market with used cars.

Industry outlook

BBL believes that this volume of unwanted used cars will subside and that this trend will tail off shortly and the market will again be stable. However, this is leaving used car dealers and every used car supermarket in with more of a chance to source cut-price used cars at auction as the lack of competition is driving prices down.

Normally, this level of used car price erosion would hint at troubling times ahead for the industry. But, as BBL is forecasting it as a current blip on the horizon more so than an established trend, the used car market should shift back to its normal levels once available used car volumes diminish.

What this means for customers

As used car supermarkets and dealers are able to buy second hand cars at auction for less than the ticket price then they can pass the savings onto customers on their forecourt; well in principle at least. However, this does not bode quite as well for those looking to offload used cars in the current market as prices have dropped well below where they should be, so it would a good idea to hold onto vehicles until the market springs back to its usual seasonal prices.


~ by velofinds on October 1, 2009.