CAP Predicts Decline in Nearly new Car Values

CAP predicts that an increase in cars being sold to rental companies along with aggressive price cuts to private buyers will cause faster depreciation by increasing the number of cars available under one year old.

Pressure on late plate used car values is a “shadow hanging over the market” according to Black Book Live – the independent real time guide to used car price trends, published by CAP.

The warning follows a stable first quarter for the year in which the new and used car markets have again defied the wider economy with strong sales and resilient used values.

Black Book Live is now predicting “a gradual erosion of values at most years and for most models” after a long period of strength in three-year-old car values.

The biggest threats to the maintenance of strong used values are identified by Black Book Live as an increase in the number of cars being sold to rental companies along with the aggressive incentivising of new car business for retail customers.

High volume rental – or ‘short cycle’ – business is known to cause faster depreciation by increasing the number of cars available under one year old, when they return to the market after a typical 6 – 9 months’ operation as rental vehicles. Strong discounting of new cars for retail customers, together with other incentives to make new cars more affordable, also inevitably reduces demand for younger used cars. The combination of more cars available, under one year old, and less consumer interest in them inevitably forces prices down.

Much now depends on continued strength in retail demand for used cars. Black Book Live notes that the picture remains extremely positive for consumers in 2013, following CAP’s predictions at the start of the year of a “win win situation” for motorists as manufacturers incentivise new car retail sales to help offset their poor performance in the beleaguered Eurozone.

Black Book Live senior editor, Derren Martin, assures the market that CAP is not expecting car values to spiral down. He said: “While we are sounding some cautionary notes about the on-going picture for trade values, we do not expect the market to go into free-fall.

“Values may well drop for the reasons we have identified, but they have not done so for some time. Depreciation is a fact of life and we should not be too downbeat that it is happening again.”