• Used customers harder to find but market remains strong, reports Cazana
• Quick turn sub-12 month sector live retail values continue to strengthen
• New car market registration changes likely to impact the future used car market

SEPTEMBER new car registration data from the SMMT  saw a quantum shift from the August return that saw such an uplift in registrations.

This was, in the majority of cases, due to the introduction of WLTP  and the need to clear the stocks of older cars. With registrations this month down by 20.5% this reflects the impact of selling cars that were not going to be able to be sold under the new regulations.

This has taken the year to date registration volume to 7.5% below the figure achieved by the end of September last year, which is on track with the Cazana full year expectation of a market decline of 6.5% over 2017.

Looking at fuel type, registrations for diesel cars reduced by a stunning 42.5% lowering market share for September 2018 to just 29% which is 10% less than the same period last year.

Conversely and unsurprisingly petrol cars took 64.1% of the market share with registration volumes down just 6.7%.

This left AFVs with 6.9% market share – an increase of 3.9% representing the continued shift in customer demand to what is perceived to a better fuel type.

WLTP impact on September registrations

September’s registration volume has been decimated by lack of new car supply rather than a significant drop in consumer demand. With the manufacturers desperately trying to finish WLTP testing of their new product, there has been quite a delay in production capacity for most cars.

This is particularly evident in the case of diesel product that has been under so much scrutiny in recent months. However, there are some who are citing that market demand has also been significantly affected by consumer confidence over Brexit and although this has a part to play, an element of poor planning on testing and production must also be partly to blame.

Therefore, it would appear that the new car market has begun to balance from the disruption experienced in recent months and the remaining quarter of 2018 will be an interesting period of trading.

With so many changes to product supply and to the stated emissions, there is a high level of confusion in the market particularly for the business user whether they be fleet owners or company car drivers. While the SMMT shows that market share between private sales and fleet sales has varied by just 1% in comparison to last year there is quite a story behind how these figures have been achieved.

Used car market – consumers search for cheaper cars

However, the used market has been a different proposition and where consumer confidence has been lower, this has resulted in buyers seeking slightly cheaper cars on the basis they would like to save money. There is little doubt that this has been good news for the OEMs that have pre-registered so many cars as the problem has been shifted to a lower price point and thus far it would seem that consumer demand has just about kept up with supply.

With quieter months ahead though it may become a challenge for used car sites to ensure that sales meet budget aspirations. It is possible that to keep stock moving there may be a reduction in retail pricing at the expense of margin as consumers begin to focus on autumn holiday time and the festive season beyond rather than buying cars.

Although these are usual seasonal factors considered and budgeted for by most businesses, with such change in the market this year it may prove to be a period of discomfort for some as competition increases.

The chart below shows overall market performance of key vehicle age profiles year on year:

This chart displays an interesting view of the market. Given the increase in pre-registrations, the trend of improving prices of Quick Turn cars in recent months was surprising as volumes had increased. However, following a month of drastically reduced new car sales, there is now an irrefutable reason for retail prices in this sector to have risen. This trend may continue during the last quarter.

Stability appears to remain in the ex-PCP sector even though volumes volumes have increased. But there is more to be revealed in the data on closer investigation. The ex-Fleet sector has recorded an increase in retail pricing over the same period last year which is positive news and it is likely to be down to the fact that WLTP has caused distress in the new Fleet market hence affecting the supply of de-fleeted product to the used market. Alternatively, this could reflect better consumer retail demand as buyers seek to save money as a result of Brexit concerns.

With values of the sub 12-month-old vehicles increasing of late the chart below looks at the data in more detail by fuel type:

The previous chart gives greater context to the increase in prices of the sub 12-month-old cars in the retail market and reflects pricing performance split by fuel type over the last year. The year on year increase in pricing for petrol cars is a significant six percentage points whereas for diesel the increase is two percentage points.

The good news is the general shape of the chart for both types of fuel is similar and this quantifies the fact that there is not a problem with used diesel cars, in the same way, there is with new models. However, it is worth noting that the delta between the two fuel types in September 2017 was just one percentage point and over the course of the last year this has grown to five percentage points.

The growth in the delta between the two is important. Although diesel is not in trouble, retail pricing has not improved as much. This is possibly due to the volume of cars in the market and without a doubt the type of car. The current new market conditions have driven the increase in pricing. There are fewer new cars for sale which has meant that manufacturer ex-management cars have been de-fleeted in lower volumes and the rental companies have been struggling to change their fleet, too, meaning reduced choice for the used consumer.

With so many changes to the new car market over the last few months, there is now a level of concern around what the impact of this changeable supply will have on the used car market in the years and months to come. This is very difficult to predict as the industry has not seen this type of disruption to the market since 2008 and that was due to a part anticipated global financial meltdown. It is true to say the European markets have also been feeling the heat too but being one of the most active and changeable markets the UK is likely to be worst affected.

The chart below shows just how much of a shift there has been in new car registrations and market share for the top 10 manufacturers in September:

New type of cars on offer to the used car market

With this level of change in the new car registrations and market share, it seems highly likely that used car buyers will find themselves being offered very different cars on the forecourt in the future. Change is often seen as good and this period of adjustment may prompt customers to review the type of vehicle they really want or actually need to meet personal requirements when they find a limited supply of what they perceive to be the right car for them.

In summary, September has been a complex month of compromise in the new car market. The used car market has changed shape due to varying quantities of used stock and the shift of consumer focus further towards used alternatives.

The finance industry has been seeking to offer better-used car finance packages to service this market shift with varying degrees of success. What we do know is that the coming months will be in part challenging but without doubt changeable and the need for realtime insight and intelligence has never been greater to keep the more proactive businesses on the right track.