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Roddy Graham's blog: 21 February 2011 - Luxury brand popularity on the up

Date: 21 February 2011

Roddy Graham is chairman of the ICFM and commercial director of Leasedrive Velo

Rolls-Royce Motor Cars, the pinnacle luxury brand, last year more than doubled its worldwide sales.  In so doing, it set a new record.  BMW fleet sales in the UK in 2010 rose by an astonishing 33% and many other top prestige brands enjoyed sales growth including Aston Martin, Bentley, Mercedes, and Porsche.  A notable exception was Jaguar, down 33%.  The upward trend for prestige and luxury vehicles is backed by a recent survey showing an 11% increase in finance for such vehicles.  Indeed, our own experience mirrors the appetite for top automotive brands.  We recently took an order for an £186,000 Aston Martin DBS Volante at a cool £6700 per month rental.

What's behind this sudden upsurge in all things gold at a time of general economic austerity?  A bit like the football transfer market, to mere mortals the world seems to have gone mad.  But look a little deeper and, in the case of luxury and prestigious automotive brands, the demand appears quite logical.  Firstly, following the recent recession, there has been pent-up demand for top marques. 

Secondly, comparatively, the rate of depreciation on luxury automotive brands is slower than for more popular, lower specification cars.  So before rates start to rise, and despite the disproportionately high cost of borrowing, those with deep pockets can still afford to spend on an expensive set of wheels.  This trend is also a further indication that certainly in the private sector, business is on the up.

The SMMT itself forecasts a more stable year for the fleet sector despite the tough economic situation which will see an expected overall decline in new car sales of five per cent.  SMMT boss Paul Everitt does not expect it to get much better for the next three to six months.  This is supported by the January new car registrations which saw the fleet share of the market rise from 50% to 54.7% but actual sales fall by 3.1%.

The used car market appears buoyant and according to many experts is set to remain so throughout the year.  KeeResources has predicted a fairly buoyant 2011 used car market with more buyers than cars keeping values high.  This healthy state should continue providing demand remains and buyers can get finance.

Manheim Remarketing has advised that the fleet sector experienced a rise in average car values of 6.7% in January with wholesale used car values increasing by just over 4%.  Even van values rose by 1.7% over December.

This is supported by BCA's latest Pulse report, which showed fleet used car values rise by 6.9% to £7739, the highest monthly average value for eight months.  Year-on-year values are up 6.6%.

All the indicators point to used car market stability although we'll have to see what happens come late March following the plate change and then the anticipated disruptions in April due to a late Easter and Royal Wedding, which will see much of the country potentially enjoy an 11-day break for just three days holiday.

Interestingly, given the above, there has been a call from the Vehicle Remarketing Association for a pooling of used car value information to make residual value forecasting less of a dark art and more scientific in approach.  It'll be interesting to see if all parties can put commercial sensitivities behind them and contribute to some worthwhile used vehicle pricing analysis, which might lead to more accurate trend forecasting.  Watch this space!

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