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Used car prices may fall next year

By raccars Published

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Used car expert CAP Black Book is predicting a drop in used car values for 2016 as a result of market pressure from the thriving new car market.

The standard economics of supply versus demand mean that large volumes of new cars are likely to push down the value of used cars. CAP is predicting used car availability will increase next year and will face increased competition from attractive deals on new cars.

Volumes are up but used car prices are down

While used car sales volumes have increased overall by 4.2 per cent for the year to date, with nearly new and three year old car sales rising even higher, used car prices suffered a drop of 2.6 per cent last month, in line with the usual market performance at this time of year. However CAP noted that higher volume vehicles experienced a larger than usual drop in average value at the 60,000 mile, three year point.

The supermini, city car and lower medium sectors suffered the largest percentage drop, all affected by strong availability and attractive offers on new models. Pre-registered models also caused noticeable ripples in the market, whereby new cars are pre-registered to the dealer in order to promote stock rotation. While these cars are often only weeks old and have none or very little mileage on the clock, they officially count as second hand, enabling dealers to sell them at a discount. While pre-registered cars can be a great deal in monetary terms and are available immediately, that extra owner can affect the resale value later on and customers don't get the option of specifying the colour or options list of their choice.

Nearly new car sales are certainly affected by a rise in pre-registered cars, with some 65 plated cars even noted for sale at lower prices than some cars with 15 plates. As a result, nearly new cars lost the most value in physical terms if not in percentage in November. In fact volumes of nearly new car sales increased by 8 per cent in the July-September period, while cars between one and three years old posted growth of 15 per cent year on year.

New car sales success continues to apply pressure

While CAP has suggested that used car prices could stabilise in January, news from the new car market is putting second hand car dealers under increasing pressure. Last month saw the best UK car production volumes for a decade, with production up by 36,000 units year on year. While a large percentage of these are destined for foreign export, domestic demand for new cars remains high.

After 43 consecutive months of growth, the new car market did stabilise somewhat in October but the picture for November is as yet unclear, with 2015 still representing the best performance on record for the first ten months of the year, and the used car market is unlikely to feel the effects for some time yet. Figures for October showed a 1.1 per cent drop in the number of new car registrations, but this was attributed in part to the effects of the VW emissions scandal.

Winter fuels demand for 4x4s

Meanwhile used car dealers are preparing for a run on sales of 4x4 vehicles, with a harsh winter predicted. This popular sector has already seen growth of 9.1 per cent this year, and seasonally 4x4s always outperform during the winter months. Data analysis suggests that used car buyers' top ten most searched for SUVs in the last few months have been the BMW X5, Range Rover Vogue and Range Rover Sport, the BMW X3, Mercedes-Benz M-Class, Honda CR-V, VW Touareg, Range Rover Evoque, Toyota RAV4 and the Audi Q5.

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