LCV SUPPLY DRAIN MAY IMPACT SMALL BUSINESSES
New BCA Report highlights issues for small business sector
Dwindling supplies of used LCVs could impact the small business sector according to a new BCA report by Professor Peter Cooke and the team at Buckingham University Centre for Automotive Management.
‘The Used LCV Market Report 2012’ suggests the availability of cheaper good quality used LCVs will decline in the next few years, because of the double whammy of lower new van sales since the recession and large corporate fleets keeping vans in service longer before selling them.
Cooke suggests this could have a direct effect on small businesses, partnerships and sole traders, who are the biggest buyers of used LCVs and may even slow down economic recovery. The shortage of units under five-years old could also present a real problem for the wholesale and retail LCV trade who could find it increasingly difficult to source good quality used LCV stock.
Cooke commented “Small businesses as a group are the largest buyers of used vans and typically prefer vehicles up to five years old. However, availability is falling because of lower new van sales since 2008 and the trend for larger businesses to hold on to vans for longer.”
Cooke confirms this will have a number of knock on implications for the LCV marketplace for several years to come. The average vehicle age will certainly increase significantly and there may be a reduction in the overall numbers of vans on the road.
He says “There will be fewer ‘first time’ used vans coming to market for buyers to choose from, which will affect price and impact used LCV supplies further down the supply chain.”
The report highlights the looming used LCV supply gap facing the industry over the next few years.
LCV new sales/forecast 2000 – 2015
While new LCV registrations continued to recover in 2011 - reaching 260,153 for the full year according to the SMMT - they remain well short of the much higher volumes seen between 2004 and 2007, when annual new sales were well in excess of 300,000 units. This means around 350,000 fewer used LCVs will reach the used market over the next five years or so.
There is also a growing bulge of ageing LCV stock beginning to dominate proceedings (chart over). Forecasts show that nearly half of the available LCV stock in the UK will be aged nine years and over by 2016.
Cooke comments “The recession-driven slump in new LCV registrations between 2008 and 2010 and the slow recovery thereafter will continue to have a big effect on the shape of the country’s LCV supply. Clearly, when new LCV sales plummet and remain low for such a prolonged period it has a powerful and lasting impact on the availability of used LCV stock.”
LCV Parc Sectors 2000 – 2015
Cooke continued “Even if there is an unexpected rise in new LCV registrations it will be several years before the numbers in the critical 3-5 year age group of used LCVs begin to grow significantly. Quite simply, there is a significant shortfall looming in the number of younger used LCVs destined for the used market. And, as the economy improves, demand will, at times, probably exceed supply by a considerable margin.”
This is highlighted in the report with BCA’s own figures which show average LCV values crept up in 2011, with the four highest monthly values all appearing at the end of the year.
Duncan Ward, BCA’s General Manager Commercial Sales commented “The market was noticeably stronger as the year progessed and trade buyers were having to look further afield to secure the stock they need. The inevitable result of more competition in a supply and demand market is that prices rise and this must be reflected in the values that small business users will have to pay the next time they change their work vehicles.”
Ward added “The initial signs in 2012 suggest that demand for light commercials is intensifying. BCA has already established LCV sales volume and turnover records in the opening weeks of the New Year and buyers are competing very strongly for stock.”
Cooke concluded “The choices for small businesses or a fledgling sole trader buying a used LCV may well become increasingly limited: buy a younger van and pay a significant premium; pay less but get an older higher mileage LCV; or defer the change completely and perhaps incur additional running and maintenance costs on an existing vehicle. None of those choices may seem very appealing when every other area of the economy is also being squeezed.”