According to the latest edition of the CAP Black Book, used car values stabilised in October and at this stage they are actually "unusually stable."
It seems that a fragile balance has been struck between relatively low stock levels and muted consumer demand.
Historical figures suggest that during November used car prices usually drop by an average of about 3%. Last year this figure was somewhat higher at 3.1%.
So far this year we have not seen a similar trend. The main reason for this seems to be relatively low stock levels in the used car industry, forcing trade buyers to pay higher prices than usual for good quality stock.
Reduced sales in the new car market means that franchise dealers are not receiving the usual number of used cars as trade-ins. To survive many of them are now also selling used cars, thereby putting additional pressure on stock levels in the used car market.
Although demand for used cars has been negatively affected by the sluggish economy, the lower stock levels have prevented prices from dropping significantly as would have happened otherwise.
Another feature of the current market is that franchised dealers are faring relatively better than independent retailers. Normally independents, with no restrictions on what type of stock they carry, have an advantage over franchised dealers. The fact that franchised dealers offer a wider variety of after sales services seems to benefit them at present.
Author - Louise Hutchinson
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