Bumpy road ahead for used CV market
Although very sensitive to economic downturns, the market for used commercial vehicles has repeatedly demonstrated itself to be up to the challenges heaped upon it by the Great British economy. Over successive recessions, which inevitably hit our industry hard, commercial vehicle markets have quickly bounced back when given half the chance of doing so. Accordingly, in a free-flowing market where the balance between supply and demand is king, sales can be expected to quickly recover as business confidence returns, the proviso being that any growth is demand led.
As 2015 is set to see LCV registrations at record highs this rule is likely to be broken. Vehicle manufacturers have honed in on the strength of the UK's economy, determined to force-feed us with new vehicles of every type with this being driven by excessive levels of discounting and other incentives. Therefore, across the market for nearly new vans, we will soon be provided with the opportunity to enjoy the thrills and spills of supply standing well above what the market can readily absorb.
We are on the brink of revisiting the self-harm that comes from overdosing on discounts that disguise the true cost of purchasing a new vehicle and thereby reduces the value of the nearly new counterpart. As record registrations are announced for 2015 in the first weeks of 2016 the PR spin will attempt to make this all sound sustainable by trumpeting the good bits such as improved road safety and job generation. The damage done to the worth of your fleet will be swept under the carpet with any upheaval seen across the market for late-year LCVs in 18 months being attributed wider economic factors leading to a downturn. The truth is that if supply and demand were kept in balance, we could expect to see far less volatility in LCV RVs. To be fair, most producers trade in a positive manner that makes good business sense and should be acknowledged, though elsewhere a great number of bad deals are still being struck.
Total cost of ownership (TCO) has long been a hot topic across the truck market where controlling costs within a fleet operation has demonstrated itself to be a sure fire route to bolstering the bottom line. More recently, the top brass in the light commercial vehicle world decided that they too wanted a piece of this action though it remains unclear if they appreciate what this entails. Primarily, they will need to get their heads round what, for some will be the challenging concept that anything which does not support residual values increases the TCO for their customers.
If residual value strength were truly the goal for those at the top manufacturing, they would always wield a big stick over those in their organisations setting the buy-backs. Sadly this is seldom the case, with the usual course of events being that when a credible and considered RV is factored into the rental computation, should it be above the competition, fudging will follow. Suddenly extra cash is added to the buy-back figure and the damage is done. For those caught up in this insidious cycle, most will just lie back and watch it unfold, typically getting themselves a new job six months before the skeletons jump out of the cupboard.
This is not a victimless crime and tends to be instigated by repeat offenders. Bad business will always come back to haunt the perpetrator, which is fair enough. The catch is that in a tightly contested marketplace, irresponsible actions from any one quarter will damage all players. We've been here before and what is set to follow will give us all a bumpy ride.