12 August 2013

Great news. New car sales are now predicted to top 2.2m for 2013. Both the SMMT and several leading industry figures are now in agreement that the year will end on a significant high.

This is great news because it means more retailers will hit their targets and bonuses will follow.

However, the thing that seems to have been forgotten, at least in some quarters, is that lots of other senior industry types also agreed that the high of 2.4m seen just a few years ago was unsustainable.

In the latest report from leasing company Arval (covered in the August issue of Auto Retail Bulletin – available here), fleet managers reveal that they’re expecting to increase their fleets in the near future (more good news), but they also report that they expect residual values to fall.

To be fair this is a very logical expectation; if supply rises, then values will fall.

Remember, fleets account for half of the new car market and these cars will, largely, be on contracts with fixed lengths. So, when new car sales go up, used car supply will inevitably rise in three to four years’ time.

While this increased supply may be welcome, it’s also something that retailers need to be thinking about now –  given how easy it is to have collective memory loss and just expect strong values for used cars.

Remember this business always has been, and always will be, cyclical.

Tristan Young

Join our LinkedIn group and share your your views with us – and other readers

Tags: sales, SMMT, used cars