– By Victoria Nelson –
The Pickles Quarterly Report was released this week with a prediction that the prices on ex-fleet vehicles will decline over the next few months. This is bad news for Fleet Managers planning to replace vehicles this winter.
Pickles stated, “We are currently seeing signs of a weakening in the market and demand is slowly dropping off. We expect to see a 2% / $500 decrease on Glass’s returns by the end of April and possibly $1000 – $1500 decrease on today’s returns throughout May, June and July once the expected aggressive EOFY New Car incentives discounts start being pushed heavily”.
Historically there’s seasonal impact which results in a slump in prices between Easter and October. The pessimists blame it on buyers disappearing during the colder months. Some pundits blame rental car companies for dumping their stock after the busy holiday season. I think it’s related to the legacy of local manufacturing which closed down over summer. So leases didn’t end until February or March when new year plated vehicles hit the showrooms, and the ex-lease would vehicles flood the market after Easter.
Regardless of the reasons in a bygone era, if Pickles are saying it’s going to be bad over the next three months, Fleet Managers better start looking at their Plan B.
In the first quarter of 2019 Pickles said returns were strong because of the hail in Sydney and floods in North Queensland. Insurers wrote 18,000 cheques to payout owners of vehicles that were damaged. These buyers came into the market looking for good quality used vehicles that are limited in quantities early in the year.
Another factor quoted by Pickles relates to the banking royal commission. Access to finance has tighten so buyers shifted from new car showrooms towards cheaper used vehicles. This makes sense when you look at the decline in new car sales year to date.
The most interesting comment from Pickles about last quarter was, ‘Extensions of fleet leases inertia – reducing the number of returned vehicles’.
This is bad news for manufacturers and dealerships that rely on fleet sales. It’s good news for leasing companies because they get to reprice a lease when it’s extended (and normally make more money). It’s also good news for tyres and mechanics because the vehicles will use more consumables while they’re in service.