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DRAMATIC FALLS IN USED CAR VALUES UNLIKELY TO BE REPEATED IN 2009

Sun, 11 Jan 2009
According to EurotaxGlass’s, the average monthly drop in used car values during 2008 (3.5 per cent) was almost double that recorded during 1992 – the low point of the last recession. Furthermore, the average three-year-old car today is worth £1,750 less than an identical car of the same age in January 2008.

However, despite the continued gloomy economic outlook, the publisher of Glass’s Guide reports that the rapid falls in values seen in 2008 are unlikely to be repeated this year. The main reason is the continued low level of new car sales (registrations were down over 27 per cent during the final quarter of 2008 compared to the previous year), which is producing a correspondingly lower number of part-exchanges for the used market to absorb.

Furthermore, the supply of nearly-new cars is over 40 per cent lower than 12 months ago, allowing franchised dealers to concentrate their efforts on retailing the more affordable cars that many customers currently want to buy.

“During the late spring of 2008 used car demand was starting to decline, and yet new car registrations simultaneously hit a three-year
high, buoyed by sales to fleets who had not yet suffered the ill effects of the downturn.” explains Adrian Rushmore, Managing Editor at EurotaxGlass’s. “This meant the new and used car markets were running at different speeds, with used car demand totally out of step with the growth in supply. As a result prices fell at a faster rate than at any time in living memory, far surpassing the decline of the early ‘90s.”

Such a severe mismatch of supply and demand is unlikely to be repeated in 2009, suggests Rushmore. “The fall in new car sales since last September has, to some extent, addressed the imbalance seen last year. While new car sales remain at a low level, the supply of used cars entering the market will be more manageable, with fewer adverse effects on residual values.”

While values are expected to be less unstable in 2009, a tangible improvement in demand is not anticipated. “Demand will remain lacklustre for much of the year. Prices for used cars have not yet hit rock bottom and are likely to continue on a downward path for much of 2009,” Rushmore concludes.

Monthly reductions in prices for three-year-old cars

The following table shows the month-on-month changes in trade prices during 2008, and the changes that took place during the equivalent month in the previous year.

Month / 2007 / 2008

January: +1.6 / +0.4
February: +0.7 / +1.7
March: -0.8 / -0.9
April: -0.5 / -3.4
May: -3.1 / -3.2
June: -2.1 / -4.9
July: -0.7 / -4.7
August: -0.5 / -3.6
September: +1.6 / -0.4
October: -1.5 / -3.3
November: -3.7 / -5.0
December: -1.5 / -1.0

More at www.glass.co.uk

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