How diesel cars are performing in the wholesale market

Diesel has been under the cosh for the past year and this has impacted heavily on new car registrations. In March, the plate-change month, sales of diesel cars fell by -37%, which is an extraordinary drop. But the used car market is much bigger and more resistant to change at the wholesale level.

To get some idea of where the market is going with regard to diesel we asked the key guide Glass’s, together with cap hpi and leading auction houses (both online and offline) a series of questions, including: How are diesel values are doing at auction? Which car segments are doing well and what segments are under performing? Are they seeing more demand for petrol cars at auction?

So, how are diesel values doing at auction? Year-on-year, how much has demand fallen? Jayson Whittington, Glass’s chief car editor, said that despite all the negative headlines, diesel is doing rather well.

“Demand remains as popular as ever for diesel at auction, in fact the overall conversion rate in March was slightly above last year’s figure. It is worth remembering that there are no fiscal penalties to owning a diesel car and they remain popular with used retail buyers. There has been a resurgence of interest in petrol models but that does not appear to be at the expense of diesel cars.”

Glass’s is not alone in its positive stance. Derren Martin, head of current valuations at cap hpi, said here has been no “discernible” drop off in demand at auction.

“However, it has to be said that this is sector-specific. Smaller diesel cars are not as popular as their petrol counterparts, whereas, for larger models, diesel remains in higher demand.

“Over the last 12 months most diesel models have only depreciated in a similar fashion as in previous years, and during April, diesel values have depreciated less than petrol ones in percentage terms. Dealers are still prepared to stock these cars and consumers still prepared to buy them.”

The guides have their take on the market and sometimes this can differ from the auction houses, but in this case they appear to be at one.

Peter Bell, managing director at Manheim said: “Diesels still hold significant demand from a wholesale perspective. Despite the ongoing confusion around diesel and the drop in new diesel vehicle purchases, end consumers are buying used diesels at steady rates, and as such, we’re seeing this demand filter through Manheim’s lanes as dealers look to fill forecourts.

“Data from our sister Cox Automotive business, Motors.co.uk, shows that despite taking four days longer to sell on average, diesel remains the majority on dealer forecourts, making up 54% of stock ahead of petrol vehicles (45%).

“This alone shows us that the anticipated gap between petrol and diesel products in the used market has not been as wide as once expected, and buyers are more interested in price and condition.

Fuel type, although relevant, isn’t the key factor.”

Martin Potter, group operations director, Aston Barclay, points out

that diesel trade-in values have risen over the past year.

“Our latest Q1 2018 Market Insights report shows used diesel part exchanges have actually risen by £679 since Q1 2017 from £3,280 to £3,959. This is on the back of a higher average age and mileage.

“Used diesel volumes meanwhile are up 26%, reinforcing the number of cars coming into the market continues to increase, while prices remain strong.

“Demand remains strong for diesel, which is reflected in the price rise, with some dealers in London choosing to stock more in favour of petrol rather than diesel as drivers get ready for the introduction of the new Ultra Low Emission Zone on 8 April 2019.”

Both BCA and Manheim offer physical and online auctions but Autorola specialises in online alone. What’s its take on the market and which direction diesel values are going?

Jon Mitchell, group sales director Autorola UK, said: “Our latest analysis of Q1prices saw diesel cars average at £11,158, which is a fall of £285 (2%) from £11,443 in Q1 2017, with average mileage and age having increased in 2018. There was a significant 48% surge in the numbers of diesels being sold in Q1 on our platform compared to Q4 2017. Despite this volume rise diesel prices only fell by 0.3% compared with Q4 2017 reinforcing prices were apparently unaffected by this increase.”

Diesel values aside we asked the guides and auctions to delve deeper and identify those diesel car segments doing well and those that are finding the going tough. Whittington at Glass’s said hammer prices at auction have been “generally strong”. Looking at the lower-medium segment he said:

“This segment has historically had a fairly equal split of petrol and diesel sales and contains popular volume models like the Ford Focus and Volkswagen Golf. Petrol models have been outperforming diesel, but rather than suffering a significant downturn in values, diesel has remained consistent.”

He said a similar pattern has emerged with premium upper medium cars like the Audi A4, BMW 3 series and Mercedes C-Class.

“Throughout 2017 the gap between diesel and petrol widened with average diesel residual values reducing by around 1%, but it is worth remembering that the volume of diesel significantly outstrips petrol in this diesel-dominated sector.”

Martin at cap hpi, said: “Smaller diesel cars are now less desirable anything from lower-medium size downwards. Many manufacturers are stopping production of diesel in the city car and supermini sectors now. For drivers that do high mileage, diesel is still the fuel type of choice, and diesel variants of BMW 3 Series, Volkswagen Passat and certain Hyundai i40s have performed well.”

But what do the auction houses think? Bell at Manheim, said: “Low- to mid-range £5,000 to £20,000 diesel volumes held steady across the board in March, despite market challenges. Premium priced, larger vehicles were given a boost, up 1.2% year-on-year to £34,113 in 2018, perhaps boosted by the bad weather and increased demand for SUVs.

“Diesels in the £20,000 to £30,000 price bracket are somewhat of an anomaly at first glance, with average sold prices down 1.4% to £23,717 in March 2018. However, closer inspection suggests dealers have been able to squeeze prices due to increasing volumes coming through. Stock of these mid-range diesels increased by over 22% year-on-year making competition on price more relaxed,” he said.