10 Jul 14
News

Tactical registrations affect residual values - BF

BF Forecasts has been explaining itsUCAX (Used Car Availability Index), allows comparisons between brands in view of the balance of supply and demand in the used car market.

The index is a measure of the market player’s ‘volume hygiene’ and tracks the availability of young used cars in the target marketplace. The term ‘volume hygiene’ is used by BF to describe the ratio of young used cars (normally under 12 months old) to sales, in the previous 12 months. But this is only one of many factors which we included for the residual value analyses.

The importance of, and the necessity for, a key figure like UCAX results from the oversupply of very young used cars caused by tactical registrations, says BF Forecasts. These are then offered at a lower price than the new stock which reduces the attraction of new cars – a critical factor influencing residual values. In some cases, tactical registrations are used to clear excess volumes resulting from overproduction. In other cases, they are needed in order to compensate for list prices that are simply too high. It isn´t a question of how many cars are sold but rather on the way they are sold.

 

BF gives examples of two quite different models and how their sales performance, using this calculation, can be considered. The Dacia Logan gains the highest possible rating. Considering that so many Logan models are on sale, it says,there is a relatively small supply of young used cars. In other words: The first owner of a Logan doesn´t change the car very quickly after purchase. This clearly indicates that the new cars are marketed through healthy sales channels, reinforcing the already strong residual value position of Dacia Logan.

The Volkswagen Scirocco gains two stars. The UCAX is between 12% and 16%. There are a relatively large number of young used examples of this car on the market, which may give the prospective purchaser a good selection and a better negotiating position, but if it becomes over-supply this will have a negative effect on the residual value.

Authored by: Tim Harrup