By Darren Kennedy, editor, CAP Black Book+The more severe winters of the past couple of years have sometimes caused chaos for the car retail sector. But while heavy snow has inevitably brought a price paid in lost sales as would-be buyers were forced to stay at home, there have also been opportunities. These have been seized by the smart trader, as dealers look to service the need for appropriate transport during the winter months. Research conducted during the summer was already suggesting that this year traders would start to speculatively purchase these vehicles much earlier than in previous years in order to try and get ahead of the game. This is nothing new for the seasoned trader. After all, they will do the same thing with convertibles during the winter months, in time for demand to resurface in the spring. But what has changed this year is that traders were actively seeking 4x4s to stock as early as September. This makes sense, in order to beat the stampede we saw last year when the weather really started to bite and prices were forced up. The graph below shows the last two years' trend and Capitalising on 4x4s as the weather gets colderCanny dealers are stocking up, but they could catch a cold if things warm upUsed car analysisFor daily automotive news visit www.am-online.com/newshow the peaks and troughs represent a distinct buying pattern for this type of vehicle. This does not represent a risk-free strategy, however. Although last year saw prices rise sharply from December through to March, they also fell away just as quickly, once the perceived necessity for such a vehicle had disappeared. The difference this year has been that buying started much earlier and brought greater increases than for a few years. October saw an increase of 2.2% when the previous high was 0.8%. November movement was an increase of 1% when historically there has been a negative movement. Furthermore, there does appear to be a small disparity between the performance of mainstream models and the prestige part of the sector. The rise and fall in values is far more accentuated in the prestige part of the sector, reflected by the prestige 4x4s climbing much more sharply than the mainstream models. Research also confirms that demand in some cases is not retail-led but about prospecting for future winter demand, following the widespread media reports of another harsh winter ahead. In short, dealers are making sure they are not caught out this year without the right stock portfolio.We do, however, advise some caution in relation to this sector. As the table (right) shows, the 4x4 sector is still tracking considerably above the long-term trend, which offers some cause for concern. The reality is that since the slump of 2008 the 4x4 market has gone from strength to strength, but you would imagine the success is more down to the extreme weather conditions rather than increased appetite for this type of vehicle. The whole sector is littered with examples of vehicles that currently look dangerously over-valued - Comparison of prestige and mainstream 4x4s
New car marketUsed CarConferenceNewsNew carnewsAMRecruitmentIndexNews digestShowroomLong term trackingPinpoint the dealer information you needThe home of dealer intelligence01733 468254 ? www.sewells.co.ukfor example, a three-year-old Land Rover Discovery is worth more in today's market than when the first returns came back into the marketplace in 2007. There is a counter-argument for the reason why the sector is so above trend; this is due to the increased level of variety within the sector. The choices available now are significantly different to what was found several years ago. The sector now offers vehicles that range from compact 4x4s which have the same level of four- wheel drive ability as their larger offerings, all the way through to luxury 4x4 models that have fuel consump-tion figures that would have been unheard of in years gone by. To put this in context, the amount of three-year- old 4x4s available in 2004 was 18, and out of these only a third was the compact version. If you then transfer this into 2011, the number jumps up to 43 and just under half are compact 4x4 versions. Clearly this dynamic is having a positive effect on the sector and could poten-tially be part of the reason this sector is so far over trend.The greatest danger facing tused 4x4s is if this winter fails to be as severe as the last two years, which could result in consumers not switching their attention to this sector. Remember the convertible sector this year failed to ignite, which nobody expected. If we end up with a calm winter, dealers could be left with a lot of stock in the new year.