25/05/2010

Although retail activity has fallen away over the past 2-3 weeks (perhaps between 10-20% depending on dealer/franchise) prices have remained reasonably resilient. Clearly (although some seem to have forgotten!) this is seasonally normal and given an election with a hung parliament and the economic uncertainties with currencies, I think we are still seeing a market that is outperforming. The prestige sector sees falls of approx 1% for June guide, outperforming reductions for a normal June market by some distance.

The reality is good stock remains short on the ground, if supply was greater and taking into account an incredibly bullish last 18 months for used car values, I think its safe to say values would be lower and are likely to have fallen harder than we have seen of late. However (and especially so at the late plate) supply does not look like increasing significantly and therefore I stick to my opinion from about 8 weeks ago, that values are likely to fall only gradually during the remainder of 2010 in the prestige sector, at worst in line with seasonal expectations. Of course all bets are off should we see a double dip recession or rates increase more than marginally this year, none of which are impossible. Some cars creep ever closer to cost new at the late plate after the prolonged strength in used car values, take for instance an Audi Q5, retailing at over cost new at the late plate, there are also countless examples where cars are close to cost new, which should hopefully serve to highlight relative new car value for money down the road. However there are still many bargains to be had and with many model refreshes this year from the likes of BMW for instance, the outgoing models can be great value for money, certainly in my opinion much BMW and Mercedes product represents fine value for money at the moment and is selling well.

Some dealer groups have or had periods when they stopped buying of late, but most are still selectively buying to refresh and replace, areas of strength are wide and most cars in good condition, with little refurb needed and in the right colour and spec will sell at or close to guide values. Niche product and bizarrely (given the time of year) 4x4's continue to be strong, with cabriolets and roadsters bid into book as might be expected. Mileage is still a big issue and cars with less than guide mileage are preferable, the less desirable cars would appear to be the more volume product and generally 3 year old leasing stock, some of which appears to be circling in auction halls, perhaps due to unrealistic reserves.

It is also worth mentioning the power of the "badge" again. Although thumbing through the guide S Line and M Sport and Sport derivatives already look to have healthy premiums over their less well specified variants, it seems the strength continues to lie with the high spec, sporting models. I would suggest that in the future premiums are likely to grow again, with far less appetite with trade and retail buyers for SE and base models. I guess even though these cars can be far less comfortable to drive (due to suspension and wheel set ups), we continue to care far more about how we look than if we are comfortable!



Richard Crosthwaite
Prestige Car Editor
Glass' Guide