News » Used van prices rising. 2015-10-04
It’s not just Irelands used house prices that are going up. Just like the lack of houses built since the crash, nobody was buying commercial vehicles and the effects are being keenly felt.
Last week I was in an auction yard in Dublin, just off the Naas road. It was Thursday, which is commercial vehicle night. It is very seldom that I buy anything at auction, but they are a great source of information and a quick way to get a feel on pricing and activity in the sector. The first thing I noticed about the auction was the quality of the stock, frankly it was terrible. I could not find a single van that was modern, low mileage and retail good. This paucity of stock may also have account for the lack of serious bidders, since there was little here to attract them.
Next stop in my Journey was the UK. I did not actually go there but logged into the live auctions to see how things were going across the water. The UK auctions are big affairs and the auctioneers push through vans with barely a pause for air. Wow, quite a collection of vehicles. Modern, clean and retail ready, yes on all counts! However, one slight problem. These auctions in the UK were ending with bids over and above what you could expect to retail the vehicles for here. Basically something was seriously off here. The residuals were too high on the vans.
Now, you would expect me to be delighted with this since we have so many vans and these residuals will result in greater profits. Well, that is not entirely true. Basically all current pricing and tenders are created with this pricing factored in and in the long run should have a neutral effect on us. Basically, the increased residuals will balance out the lower residuals we encountered after the boom where many hire vehicles came in worth far less on the used market than on paper.
Anyway, later in the week I encounter a customer who operates in Terenure, Dublin. He was upbeat in terms of business (Building contractor) and had just purchased a small tipper for his business. The tipper was a Ford Transit T350 with 10ft body. It was a 2008 model with 86,000 miles ( UK import) on the clock. It was quite an attractive little truck and I wished him the best of luck with it. “It was very hard to find a good clean one” he commented before telling me he has paid 9,600 euro plus vat for it. Later, I started to do some figures. The same vehicle in new would be about 25,000 euro plus vat net. Given a six year old unit is nearly worth ten grand the annual depreciation is around 2,500 or 50 euro per week over 6 years. Basically this vehicle is very overpriced by the used market, but this is down to availability. Tippers are a rare vehicle currently and command a premium. Basically this customer, who works his vehicles very hard will be lucky to get 2 years of use from his little truck before major repairs will be needed. I found it difficult to see the logic buying a vehicle this old for what is typically hard work.
A trader who occasionally purchases ex-lease vehicles from us told me this week of some strange changes in the used market. Let me preface this section by remarking that the Irish van buying public are some of the most cautious and predictable consumers out there. This is not meant as a slight, but rather to draw attention to how predictable demand for certain vehicle types are. Anyway, the trader commented that he had recently sold a large number of 2010 Ford Transit T260 short wheelbase units to the trade. A couple of years ago this would never have happened since the Irish consumer usually wants the larger format van. However, since supply is so tight and the premium for large vans is higher the consumer will now consider the hitherto inconceivable.
Which gets me back to the original point. In a market where vehicle supply is very tight and residuals are high, the long term rental option can certainly make more sense than overpaying for a used vehicle which may not be suitable for the type of work that you intend to put it on.