Pricing and sourcing in the current van market
The increased demand for commercial vehicles has been unmistakable following the immediate uplift in online shopping from April 2020 onwards, when more vans were needed to satisfy changing purchasing patterns. With forecourts reopening last week, we see no signs this will die any time soon. Visits to Auto Trader Vans reached a record high in March, up 77% compared to 2020 and up 47% compared to 2019.
So how are van retailers coping with the increased demand, the shortage in supply, increased pricing and uncertainty of the future of the market? We spoke to one independent and one franchise retailer to get their thoughts.
The effects of high demand on pricing
For a 15th consecutive month, the average price of a used van on Auto Trader increased YOY – this time 22% higher than March 2020. And retailers are reporting similar trends. Garry Bird, owner of Independent van retailer GB Woodfield explained to us, “we’re buying vans at the retail price of 12 months ago, around a 30% increase YOY and it’s continuing to rise further because of the demand caused by the easing of some lockdown restrictions this month”.
But these increased retail prices haven’t put buyers off, and speed of sale on Auto Trader continues to drop. In March, 72% of the used stock on Auto Trader was on site for less than 60 days. Lewis Bailey, Senior Commercial Sales Manager at Hendy Group spoke to us about the demand they’re experiencing.
“Some used pricing valuations are even coming out as more than a new vehicle would cost – demand is so high that people are willing to pay that premium so they don’t have the 3-month wait for new.”
Is the pricing “bubble” likely to burst anytime soon
This current market situation has undoubtedly left many questions around how long this can last, and indeed, when demand does start to drop, what will happen to retail prices and how quickly. “This magnitude of demand can not be sustained at this level. However, I don’t think prices will drop instantly because retailers can’t afford for that to happen”, commented Garry Bird.
Matthew Thomas, also a Commercial Sales Manager at Hendy Group predicts that prices will start to drop later in the Summer. “What really affects supply in the van world is rental companies’ stock. They’re factory built so new vehicles will start to arrive July to September time. If this comes through at the numbers we are expecting, that’s when we expect to see large numbers of used vehicles being de-fleeted and coming back into the market”
Buying at high prices
Hendy are doing what they can to satisfy demand, whilst minimising the risk of being left with expensive stock if prices do begin to fall.
“At auction we stay sensible and bail-out when the price gets too close to a new one. It’s cherry picking and buying the right stuff at the right time and we’ve done some good deals. Last year we bought a big batch from a rental company and in the space of 3 months the book had gone up so much that were having margins we’ve never had before. This mixed with a bit of luck and having good contacts that we are constantly on to”, commented Matthew from Hendy.
And although Garry is less concerned about a sudden price drop, he’s still trying to minimise risk. “I’m being careful about what I buy and what I pay for it, for me the pricing tool is a go to. I check every purchase against the current AT valuation to make sure we have a good margin and have enough room in that margin to be flexible if needed”, he added.
April and beyond
Following showrooms reopening this month, Hendy anticipate a gradual pick-up in demand , “but I don’t think we’ll see a drastic increase like they are expecting in the car side of the industry who are much more suppressed by people not being able to touch and feel the vehicles"
Garry explained how they are in a constant state of readiness to react to the market, which is fairly easy being a small independent business, “We’re hoping the consistent increase in number of purchases with home delivery and click & collect continues as it’s more time efficient. It suits us working more online and we have a good delivery process and system in place.”
Despite pricing remaining high and some caution still being needed when sourcing, the speed of sale through Auto Trader is continuing to improve, and by pricing accurately to live market conditions, retailers can continue to make a healthy margin whilst reacting to any shift in buying behaviours.
To help you succeed in this rapidly growing market, read about our latest research into the van buyer. You can also watch our retailer masterclass series specifically for van retailers, and use our market insight tool to navigate the changing market with more intelligence, available to all customers in Portal.