Late plate used cars: harder to find; more costly

 

SMALL businesses looking to save costs through buying one to two year old used cars are in for a shock.

The number of these low-mileage previously owned cars available on the market is shrinking. And shrinking fast. At the same time, prices are likely to rise.

A new report on the used car market says that, with new car sales declining, the number of younger used cars on the market will decrease. The result will be less choice and higher prices.

“The shortage of younger used cars means there could be a sustained rise in residual values caused by recession,” commented Professor Peter Cooke, author of the report.

The 2009 Used Car Market Report from BCA found that sales of up to two-year-old cars has slipped. It is these cars that represent one of the largest sectors for dealers to retail on to small business buyers.

According to Professor Cooke, not only has the declining new car market been a factor, but so too has companies extending the contracts on their lease cars. “We will see a continued tightening of the used car market. It means dealers will need to look for older cars as the price of younger used cars goes up. And business buyers will need to move to buying older cars to get the value,” added Professor Cooke.

However, there is an upside to this. Although the younger used car bargains are going to be more difficult to find, small businesses turning to contract hire will see the rise in residual values reflected in lower monthly lease costs.

“This isn’t theory,” confirmed Mike Lloyd, managing director of Pedigree Automotive Solutions, a BVRLA-approved car leasing broker. “It’s happening already. The finance companies are predicting firmer values, which means the fluctuations in contract hire rates we were experiencing are not only stabilising, but in some cases the rental amounts are heading downwards as a result.”

The BCA report forecasted that the downturn in the new car market – and upswing in used car values – was likely to continue for several years.

“Good value for money deals, whether on new or used cars, will continue to be around,” added BCA’s Tony Gannon. “But they will just be harder to find,” he added.