Linked trends across the new and used vehicle markets are presenting a mixed bag to fleet managers who are in the process of turning over their assets.
A return to normality in the new vehicle pipeline after years of shortages means companies are now able to find replacement vehicles for their ageing fleets more quickly, and at keener prices.
But the stronger new market over the past six months correlates with price softening in key areas of the used market — including on vehicles aged under five years, and particularly for SUVs.
It appears that stronger supply of ex-fleet vehicles on the wholesale used market — vehicles which are often being remarketed with more kilometres on the odometer and an older build plate than would be ideal in a perfect world — are unsurprisingly offering leaner returns to sellers for the time being.
VFACTS new vehicle sales data shows four of the previous five months have reset all-time delivery records, with the market now sitting at about 900,000 sales to the end of September — on track for an all-time tally.
Sales to fleets belonging to businesses (sales up 15.5% YTD) and governments (up 15.8%) have grown faster than the private sector (up 8.1%), highlighting an outsized role played by the fleet sector in 2023’s growth.
The knock-on effect is more action in the wholesale sector, with fleet remarketer Manheim reporting a 25.6% jump in auction volume in September year-on-year, and a 17.2% jump year-to-date.
This correlates with a 15% year-on-year decrease in the company’s volume-weighted price index for remarketed vehicles, and a 20% reduction since said wholesale price index peaked in May 2022.
It’s important to add that vehicle segments behave differently based on age and stage.
For instance, the Manheim price index for wholesale passenger cars is down 10% over the last quarter and 9.1% over the past six months, while SUVs are down respectively by 11.3% and 9.9% on the index over the same period.
On the other hand, wholesale pickups are down 1.8% over the past quarter and 0.6% in the past six months, suggesting stabler prices. And wholesale vans and buses are up on the index over the past quarter (by 4.1%) and six months (5.7%).
It appears to be a far better time to be offloading light commercials than passenger vehicles, even though anyone in the auction world will tell you wholesale commercials are often being on-sold with high mileage.
As seen in the retail used market, older used vehicles at auction are proving notably more expensive than they were pre-COVID, when compared to newer vehicles.
For instance, expected prices for passenger vehicles aged 2-4 years are 29.6% more expensive than they would have been in December 2019, whereas those aged 8-10 are on average 78.6% more expensive than the same sort of vehicle pre-COVID.
This pattern, also evident on SUVs and light commercials to a lesser degree, shows that demand for older and traditionally cheaper used cars from people facing economic hardship is keeping prices inflated, whereas younger used vehicles like those sold by fleets consistently remain on average closer to their December 2019 prices.
Looking further ahead, it’s probable that wholesale passenger car (non-SUV) prices should linger at their more elevated score on the index given the rapid collapse of sedan, hatchback and wagon sales in the new market, yielding up a smaller pool for second-hand wholesale buyers, and thereby driving up demand and prices.
The main take-away here appears to be, that while fleets will be having an easier time procuring new vehicles, those remarketing old vehicles should expect some lower returns at the other end based on wholesale price curves, or risk keeping stock on their books longer and burning money in the process.