The LCV market continues to go from strength to strength with average values up by 3.6% in September on the back of an “apparently insatiable demand for used LCVs”.
Cap HPI said prices have risen beyond all expectations since lockdown and the increase in the last month comes on the back of stock shortages, uncertainty over future supply and continued rises in demand – and the firm says the pattern looks likely to continue for the foreseeable future.
On average, a three-year-old LCV is up by 15% on July and 18% on January.
Almost all sectors are seeing growth, bar minibuses which continue to struggle for obvious, social distancing reasons. In contrast, the demand for panel vans continues to grow, with high conversion rates at most sales, and even the Euro 5 engine models have been making strong prices. This is expected to increase as Christmas approaches.
One issue could be the downturn in new registrations. While latest SMMT figures highlight a rise in September sales, year-to-date registrations of new LCVs were down by 89,416 vehicles compared to the first nine months in 2019. But while Cap said such a large deficit cannot fail to have a massive impact on the supply of stock to the used LCV market, there are many other factors to consider.
Issues with sourcing new vehicles means franchised dealers are currently running very low on new vehicle stock with long lead times being quoted for any new orders and at the same time struggling to fulfil existing orders.
LCV operators are deferring vehicle replacement and extending leasing contracts, with many leasing companies also struggling to procure new vehicles. There are also backlogs with body/conversion companies delaying the commissioning of new vehicles.
Cap added: “With market prices continuing to climb, the vehicle leasing industry faces a Catch 22 situation. As vehicle residual values continue to increase, they are restricted in writing new business due to new vehicle supply problems and the unwillingness of operators to end existing contracts.”
Steven Botfield, senior editor, commercial vehicles and motorcycles at Cap HPI, commented: “Looking ahead, we remain mindful of the volatility of the used LCV market and that any situation can change rapidly. Pent-up demand and a desire to own some stock that hasn’t been seen for a while can often lead to a feeding frenzy. This can drive up prices beyond their true worth only for them to come down again as the market stabilises.”