Fall In LCVS Is Caused By SMES Switching
The fall in new light commercial sales is nothing to be frightened of according to Alex Wright, managing director of Shoreham Vehicle Auctions (SVA).
New LCV sales up to 3.5 tonnes GVW have fallen by 5% (7,689 units) in the first five months of 2017 as expanding smaller companies who are concerned at the outcome of the election and Brexit are spending £10-15,000 on a good quality used van rather than buying or financing £25,000-30,000 to buy a new one.
This spells good news for the used market as the demand for one to three-year-old used LCVs is set to grow over the coming two years until the true results of Brexit are realised.
“The light commercial market is well tuned to the current economy such as low interest rates, low unemployment figures, higher inflation and a falling Sterling. These current economic factors plus the election and Brexit are all enough for an SME to switch from a new to a used purchase for the time simply to manage their risk,” explained Alex Wright, managing director of SVA.
“Cashflow is king and they are able to change their purchasing decisions swiftly to protect their cash in the bank but not preventing them growing their businesses,” he added.
The good news is that there are no signs of larger companies either putting new van purchases on hold or dramatically increasing their used replacement cycles as they did between 2009 and 2013. SVA is still seeing a steady flow of three-to-four-year-old used ex-fleet stock coming into the market, which will help satisfy this demand from SMEs.
There is also a sufficient price gap between the nearly new demonstrator stock and the three-year-old van market not to damage prices of the latter. SVA’s conversion rates have remained consistent at between 80-90% at most of its auctions in 2017.
“This price gap means that independent dealers are buying in three-year-old stock and older to complement some of the newer stock they are able to source from the manufacturers. This gives them a mixed range of stock which helps them manage their own businesses more effectively,” said Wright.
SVA is predicting a settled used market entering July and August with demand growing and prices remaining at their current levels rather than suffering from the normal summer dip. Only if new van sales plummet in the coming months will used prices rise above inflation again as demand threatens to exceed supply.
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