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Used car market edges up
New-car trade-ins drive used car volumes as fleets get back in the game
20 Apr 2010
By PHILIP LORD
CAR dealers and auctioneers predict a rise in used car business this year on the back of improved business fleet turnover and growing private buyer trade ins.
Although national used-car sales figures are not readily available, a snapshot of New South Wales Roads and Traffic Authority (RTA) used-vehicle transfer numbers reveal a gradual upswing in volumes this year compared with the same period of 2009.
While first-quarter used vehicle transfers have only edged up from 149,518 cars and trucks in 2009 to 151,835 vehicles this year, the industry hopes it will be the harbinger of better things to come.
Strongest growth in March was in passenger car transfers between private parties, with 2978 more transfers than February, which itself recorded an upswing of 2024 transfers over January.
While 22,520 transfers were recorded in October, the monthly transfer rate from November to January was static at about 21,500.
Dealer sales to private parties did not grow as much, although the relatively static transfer rate between October to February increased by 1635 for March.
Total passenger car transfers, which includes all registration transfers between parties including private-to-dealer, dealer-to-dealer and business transactions, saw a 8078 increase in March over February.
Auction house ManheimFowles’ chief executive officer, Scott Levy, said auctions still lacked stock, but there was promise of greater volumes.
“In 2010, whilst used car supply is still fairly tight, we can see that fleets are starting to be refreshed, so good volumes of product will be coming down our lanes in the coming weeks and months,” he said.
“Values are remaining strong, however, as the public are still looking at all their purchasing options with a view to buying as best they can.
“Average attendances at our weekly auctions in Melbourne and Sydney for example is around 3000 people.”
Dealers in Victoria and Western Australia are struggling to replace stock sold off in sales of hail-damaged cars.
Melbourne’s Nunawading Toyota used-car sales manager Con Zuras said: “We increased our volume with the sale of our hail-damaged used cars, but I’ve seen a distinct shortage of cars to replace them with. I can’t get stock now.”
Mr Zuras said he was getting calls from WA dealers who were desperate for stock and were willing to pay for it.
“I might get a call on a Prado I think is worth $30,000, but the dealers over there could normally get $32,000 for it landed in Perth. But they’re paying a lot more for used cars now.”
Mercedes-Benz Australia/Pacific’ senior manager of national fleet and pre-owned vehicles, Peter Ward, said Benz dealers could not find adequate used stock but agreed that there appeared to be a turn-around emerging.
“It’s been difficult to get stock, largely due to the shortage of new cars and the lack of trades coming in,” he said.
“I don’t know how long it’ll last. I think it’ll go back to normal from now onwards, with normal trade-ins from the marketplace. At the moment, I think customers are holding on to their cars a little bit longer that what they used to.
“The dealers are starting to get more trade-ins now that new-vehicle stock is starting to come though. It was only a month ago that a dealer would ring me and say ‘I just need stock’. They wouldn’t care what they paid, they just needed cars from our flee.”
The upswing in better-quality stock is not across the board. According to Brisbane’s Norris Motor Group assistant sales manager, Matt Collins, used cars are still selling quite well, but with no real change from last year. The yard sells about 100 used cars a month.
Mr Collins added that he had observed that profit margins were down on figures achieved five years ago. “You make up for it with volume, but there is less good stock around,” he said.
Mr Ward has also noticed eroding margins for used vehicles at Mercedes-Benz dealers.
“I’ve definitely noticed that used car margins are a lot smaller than they were three years ago,” he said.
Larger metro dealers in the industry say that up to $3000 is costed to each used car to cover statutory warranty and other operational costs, and that they hoped to make $1000 profit – although that was often eroded.
Pickles Auctions Sydney branch manager Steve Allen confirmed that his auction company was experiencing easier supply of good used vehicles.
“People are starting to turn back to how things were in the good times,” he said. “That is, they are starting to think about buying a new car.
“Auctions are starting to level out again. There’s a steady flow of vehicles sold, not quite the demand that there was, although volumes are similar to what they were last year.
“I don’t think there is that strong demand for used cars – that was unusually strong for the last couple of years – so I think we’re getting back to the way things were.
“Prices are more realistic that they have been.”
Mr Allen said many fleets that held on to cars during the financial crisis rather than turning them over should begin to change over their cars this year.
“We might see an increase in numbers later in the year, and it won’t be from finance companies, it’ll be the fleets,” he said.
The federal government’s tax break for small business has had a positive effect for some dealers.
Muirs Holden/Kia dealer principal Matthew Muir, of Ashfield NSW, said the quality of used stock had improved with buyers trading up to a new car to take advantage of the government’s small business incentive, and as a result his dealership had not needed to seek as much used stock from auction.
“Out of that came some good, quality late-model vehicles that you traditionally wouldn’t see because people could really take advantage of it,” he said.
“A car that was one or two years old that they would’ve kept for possibly two or three years they decided to trade that vehicle in and take advantage of the tax break.”
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