4x4 Volumes Lead To Reduced Demand And Faster Depreciation, According To CAP

RETAIL DEMAND for used 4x4s is flagging, while new figures show that depreciation has been significantly steeper than in other vehicle sectors over the past two years, according to new research by CAP.

It means that the typical ‘heavy’ off-roader registered three years ago has lost an average 33 per cent of its value over the last two years, compared with less than 25 per cent for an average medium-sized family car.

Smaller ‘lifestyle’ 4x4s - the so-called ‘soft-roaders’ - have fared even worse, with average depreciation of 35 per cent over the period, according to CAP Black Book, the benchmark used car values guide used by Britain’s top dealer groups, 48 out of the 50 biggest fleets and the major financial institutions.

Contributing to the tougher market conditions for 4x4s are increased fuel costs and taxation changes but dealers also identify the decline in demand for off-roaders this year as due to a growing image problem brought about by negative media publicity.

Every used car dealer questioned in research during July reported reduced demand for secondhand 4x4s this year, compared with 2006 and universally attributed the reduction to ‘negative publicity’. But CAP believes this is just one of a range of factors, led by high volumes which have reduced the image of exclusivity enjoyed by many off-roaders.

CAP’s figures show how large and smaller 4x4s have performed in comparison with other vehicle sectors over the past two years.

Taking a one year old car in July 2005 and tracking its depreciation over the following two years, CAP analysts demonstrated that 4x4s have lost their value more quickly during the period than any other sector.

Many used car dealers are currently reluctant to acquire 4x4s speculatively for stock and prefer to have a retail customer already lined up before buying one in the trade.

Although it is tempting to attribute the under-performance of 4x4s in the current marketplace to changes in taxation announced earlier this year, CAP believes that the chief reason is supply outstripping demand.

Black Book Valuation Relationship Manager, Robert Hester, said: “The taxation issue is something of a red herring. These vehicles enjoyed huge popularity in recent years and now that many are returning to the used market there is insufficient demand to keep prices strong. There is also something of an image problem for off-roaders in our cities but in general the issue is volume. They have gradually lost their image of exclusivity and have therefore become victims of their own success.”

29 July 2007 Staff
 
 

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