Article date: 15 October 2008
- Tough decisions needed to boost recovery
September saw car manufacturers cut back production in an effort to match falling demand. The ailing pound pushed UK new car prices even higher and whilst the US finance market shored up Freddie Mac and Fannie Mae and, subsequently, AIG, it was still hit by the demise of Lehman Brothers.
With that as a backdrop, and with most cars manufactured outside the UK, the falling pound should lead to a round or two of new car price increases in the coming weeks, particularly for those made in the US.
When it comes to the used car market, the situation is equally challenging. Used car valuations are down by more than 25% year on year, according to the latest figures from the HPI Used Car Valuations Index. And used vehicle values have suffered further falls in both the car and light commercial markets.
Combine this with lower demand, high stocking costs and shrinking profit margins and you could have a recipe for insolvent dealerships.
But there is hope that things may be about to bottom out. Despite the across the board falls, some sectors are performing better than others and a few are beginning to show very small signs of a potential recovery.
Buyers continue to downsize, which is having a negative impact in the Luxury, Premium and 4x4 sectors. However it is buoying demand for many City cars and Superminis.
The petrol 12-month-old City car recovered slightly in September, with its year-on-year fall at 9%. The diesel version performed even better, showing a total fall of 5.6%. While neither are by no means great, they compare favourably against the average year-on-year fall for all 12 month vehicles of over 20% and the 33% drop suffered by the three-year-old luxury sector.
While doubts linger over the Government's vehicle excise plans, the City car will continue to benefit as people look to reduce their CO2 emissions - and possibly their tax burden too.
However, one sector that may have fallen as far as it can is the three year old family car group. Both petrol and diesel family cars saw values rally a little in September, rising 2.3% and 1.9% respectively, compared to year-on-year figures for August against September. The 12-month diesel MPV is also steadying - perhaps a sign that family practicality is fighting back over image?
But, there is no escaping the fact that on the whole, year-on-year, values continue to drop. And when we compare the variances of year-on-year figures for August against September, we see an average fall of around 3% a month for all 12 month old vehicles and 2.4% for all three year old vehicles.
The much-maligned 12-month-old petrol luxury sector slipped the most, falling another 6.4%, followed closely by 12-month diesel Small cars at 6.1%.
Martin Keighley, HPI valuations expert, believes tough decisions are called for to ensure the early shoots of recovery take hold. "Overall things are bleak, but as we approach Christmas it is hoped values will level out as the rate of fall begins to slow.
"More and more of us are making the difficult decision to cut losses. The time for sitting tight and hoping for the best has passed. Of course, it's a bitter pill to swallow, but the alternative is even worse."
The percentage fall in values up to September 2008
12 Month Petrol
12 Month Diesel
36 Month Petrol
All (by sector)
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Notes to editors:
*About HPI Valuations
HPI's valuation service is offered in partnership with used vehicle experts Vehicle Information Publishing Ltd (VIP) who have provided current and forecast used values for cars and light commercials for over four years. As well as Fleets and Dealers, their customers include What Car? and Wisebuyers. VIP was founded by Martin Keighley and Alan Senior who together, spent more than 35 years working for CAP Motor Research. VIP launched the TraderGuide book in 2005 and then the PC application VIPDATA (www.vipdata.co.uk/) in 2007, providing values for over 30,000 vehicles.
Martin Keighley has spent his entire career working with used vehicle valuations in one form or another. During 17 years at CAP Motor Research he was editor, publisher and director of the Black Book. This followed seven years in used vehicle remarketing. Brief spells in auction management and leasing operations provide a unique mix of experience and knowledge. He is one of the most experienced used car pricing experts in the UK.
Originally established in 1938, HPI Limited is a primary source of vehicle information for the UK motor industry and motoring consumer, which since August 2004 has been owned by Norwich Union. HPI encompasses both the HPI database of all UK road registered vehicle descriptions and histories, and the National Mileage Register which holds in excess of 125 million mileage readings.
Together, HPI and NMR represent the UK's largest vehicle information source, combining and interpreting data from government agencies, industry bodies, private organisations, the police and the general public. Registering with HPI helps companies to protect their financial interests in motor vehicles and a wide range of other mobile assets. HPI Checks give purchasers instant confirmation of whether vehicles are correctly described, known to be subject to outstanding finance or serious accident damage, or recorded as stolen or "clocked".
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(1) All prices include VAT and are correct as of 1 January 2006
(2) Mileage Data is not covered by The HPI Guarantee
(3) The HPI Guarantee is subject to terms and conditions