Lines between volume and premium brands are blurred, but does that manifest itself come defleet time?
With Audi, BMW and Mercedes-Benz firmly ensconced in the top five of the UK new car sales charts, the concept of premium brands being able to command premium prices could be seen to be under threat. So do these big-selling brands maintain their price advantage when they hunt for a second owner?
“There is a definite strength in the performance of premium brands in relation to the percentage of Cap achieved,” says James Dower, account director at CD Auction Group. “Premium brands are still sought after in the used market, and there seems to be no oversupply.”
Remarketing giant BCA has reported good interest in executive, luxury and performance vehicles.
But it’s not a uniform equation, adds values expert Cazana’s director of insight Rupert Pontin. “It’s not difficult to distinguish between premium and volume, although the percentage difference between the two is not always consistent,” he says, pointing to factors including model, time of year and consumer awareness of different types of car, as well as volume of a particular product in the marketplace.
“Some premium brands have damaged residuals by putting too many cars into the marketplace in the belief demand will match supply because of who they are,” he says.
Sportier trim levels such as Audi’s S Line and BMW’s M Sport are maintaining their popularity among second owners, according to Pontin.
CD Auctions’ Dower said VW has been the outstanding volume brand, with the Tiguan SUV in particular, while Honda’s Civic is another achieving strong used values.
NO PREMIUM ON OPTIONAL EXTRAS
The residual value of optional extras doesn’t increase with premium brands, according to Rupert Pontin of Cazana.
“There does not tend to be a difference in the allowance for optional extras where they are comparable options,” he says.
“The cost new of the options, premium or not, is similar, and so is the used option value.”
James Dower of CD Auctions adds that the omission of certain options, such as leather interior or navigation, would historically have affected the sales performance of premium cars, but these are now almost universally fitted, and residual values are protected by lower numbers of poorly specced vehicles entering the market.
ELECTRIC AT A PREMIUM
The flourishing market in electric vehicles is gently having an impact in the used sector, although volumes are still low.
“There continues to be improving levels of demand from professional buyers for electric vehicles,” says BCA’s COO UK Remarketing, Stuart Pearson. “The rising values for electric vehicles reflects that the market is getting more receptive to alternative fuels with knowledge improving.
“These values also reflect the rising numbers of premium EVs handled by BCA – Audi, BMW, Jaguar, Mercedes-Benz, Polestar, Tesla – in what remains a very low volume sector.”
“At the moment, there is the same premium-to-volume residual value differential, and this is unlikely to change,” says Cazana’s Rupert Pontin. “Remember, you are buying the brand, and the only difference is the propulsion type.”
Stuart Pearson, BCA COO UK Remarketing, gives his key points on the issue of seasonality in used car values
1. Strength across the board.
BCA has seen competitive bidding across the board from high value prestige stock to older, higher-mileage budget vehicles since the pandemic started a year ago. Average values have accelerated in 2021.
2. Budge buoyancy.
Demand for lower-value, budget vehicles has remained buoyant from the first days of lockdown and resulted in some unprecedented price increases.
3. Higher-value vehicles on the up.
One of the most significant trends over the past year has been the upswing in demand for higher-value, retail-ready vehicles. This initially coincided with the reopening of many franchised dealerships and car supermarkets following the first lockdown and has been maintained into this year. Higher grade, well-presented vehicles with full histories and clean BCA Assured reports have been at a premium.
4. Spec is specific for models.
A good spec on the right car will support its value and speed its sale, while the wrong spec will have the opposite effect. Clearly, buyers have different demands when they are buying a city car, small hatchback or family car than a performance saloon or executive estate.
5.The market is at present fuel agnostic.
While it is tempting to suggest that diesels are out of favour and there’s a huge rush towards alternatively fuelled vehicles, the reality is that the market was very steady. The effect of the pandemic aside, it is apparent that demand was well balanced for diesel, petrol and hybrid vehicles.