Used car supply is improving, but what does that mean for you?
Debbie Fox, commercial director, epyx
Finally, it looks as though the used car and van stock situation is starting to ease a little after two years of unprecedented market conditions. We’ve seen the numbers of vehicles published on 1link Disposal Network rise by 63% in February versus January, which is a substantial increase, and trading has been very active.
Why is this happening? Well, new car supply is slowly improving, if in a very patchy fashion. While some models and some manufacturers continue to be in very short supply, delivery times for others are returning to reasonable timescales, measured in months rather than tipping over beyond a year. In turn, this means increased used stock churn.
What effects will this have for leasing companies using the platform? Our view is that this is going to be an incremental process, so there is no reason for sudden changes in disposal plans. It is extremely unlikely that there will be a step change in used stock supply to the extent that values are adversely affected. Indeed, most commentators do not expect a complete resumption of pre-pandemic levels of new vehicle production until well into 2023.
However, there are some factors of which to be aware. One is that some of the stock now being defleeted has been operated harder and for longer than would normally be expected thanks to the difficulties of the last couple of years. Ex-lease cars at five years old and vans at six to seven years old are more common than usual at the moment. These will need careful assessment and pricing going forward.
Also, in the longer term, some degree of rethinking when it comes to remarketing may be needed by leasing fleets. After a period when almost anything could be sold for a price that was probably unprecedented, a more strategic approach – potentially, a more traditional one – will be required as larger numbers of vehicles return to the market.
Overall though, we see it as very much a positive that a higher degree of normality can be seen once more in the used car and van sector. While the conditions we have seen in the last couple of years have produced some extraordinary margins, the shape of the market is not sustainable in the long term. At some point, a normal degree of stock turnover from new to used is very much desirable, and we’re pleased to see it returning.
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