We take a high level look at what’s happening in the new van market and how it’s affecting the van user in the street
The van (and car) industry was severely impacted in 2021 when, due to a number of factors, manufacturers found that they couldn’t secure the supply of semi-conductors (otherwise known as silicon chips) they needed to build new vehicles. This has had an unprecedented effect on new vehicle supply and has impacted the used van market too.
Why can’t I get a new van right now?
It’s impossible to build a new van without semi-conductors. While not all chips are in short supply, virtually every vehicle from all manufacturers requires a constant flow from suppliers to enable production to continue. The supply shortage has led to many van brands having to suspend vehicle production and to even temporarily close manufacturing plants.
The situation has become so critical that some customers placing new vehicle orders in the latter half of 2021 have been given delivery dates of well into 2023, or even no promise whatsoever.
Manufacturers make less profit when supplying their really big fleet customers. As they’re in a position to pick and choose who the few vehicles being built are to be supplied to, they’ve been cancelling huge orders from these large scale van users, concentrating on the more lucrative small and medium business sectors.
OK, what can I do? I can’t wait a year for a new van – mine is on its last legs and is costing a fortune in repairs. Buy used maybe?
It’s the logical answer, isn’t it? If you can’t get new, the next best thing is to buy a used van, and preferably one that’s as close to new as possible. Unfortunately, things aren’t currently that simple.
The majority of used vans are usually sourced from auction companies who sell the vans on behalf of the leasing houses. At the end of their client’s finance agreement the lease company will defleet it (remove vinyl lettering, ancillary equipment and possibly refurbish the bodywork) and put the van through an auction sale.
Right now, the natural cycle of fleet replacement is being disrupted. Although the lease company may be due to collect the old vehicle from the end user as the four-year agreement is at an end, they’re not in a position to replace it as there are no new ones available.
In many cases this isn’t a huge problem – they’ll just extend the lease until things improve. But auction entries are drastically reduced in number and the used van traders will fight over the few that make it into the sale hall.
So, used vans are around, but not as many. I should still find something…
As the trade is fighting for stock, they must pay dearly to secure a vehicle. They can’t make money from an empty sales pitch and they know used vans are in huge demand from potential customers.
As a result, 2021 saw used van prices rise to record breaking levels. Prices were rising that rapidly we saw 18-month-old vans being sold for more than the list price of new vehicles, and traders buying vans from other dealer’s forecourts at full price and reselling them for even more.
And private individuals were selling their used vans to dealers for more than they had paid for them three years previously, despite the mileage that had been put on the van in the meantime.
I still think I’ll have to bite the bullet. What are the risks?
The rise in used van prices has almost totally been driven by lack of availability (although we should recognise that a boom in demand for home improvements and online shopping triggered by the pandemic is also a factor).
The chip shortage is temporary, and some industry experts predict it to ease during 2022 with vehicle production getting back up to speed later in the year and into 2023. This will release a pent-up supply of used vehicles into the market and, in addition, those who had been buying used in lieu of new will no longer be searching for second-hand vans.
All this means used van values are likely to weaken, as supply increases and demand swings the other way. So, if you’ve paid handsomely for an 18-month-old used van in the current climate, you might get a nasty shock in three years’ time when you come to part exchange it.
The depreciation you’ll have incurred will be much higher than in more normal, settled times. And if you only paid a low deposit, you may owe the finance company more than the van is worth.
So what options do I have, if any?
- Sit it out. Even if maintenance costs are creeping up, it’s unlikely that they’ll exceed the extra depreciation you might pay on a used van that could fall rapidly in value.
- If your van is on lease, be it contract hire or where you have the option of paying a final balloon payment or handing it back, talk to the finance company. They may be able offer an attractive option as they’ll want to retain you as a customer in the long term.
- Don’t forget, your old van will be worth a lot more than it was a few months ago, and the value will fall again. There’s a chance that a deal to exchange it for a newer one might be more attractive than you think, but tread with caution.
- Talk to some of the rental companies. Many will offer something often called ‘flexirent’ – it’s like medium term rental where they will supply you with a hire van for, say, six, nine or 12 months. It might work out quite competitive, particularly if you sell your current van now while prices are high.
Tim Cattlin
Consultant and freelance writer to the van industry
I started my career selling vans in the mid-eighties, progressing through dealer groups to management level. In 2010 I joined vehicle valuation company CAP, being made responsible for forecasting future used values for all makes and models of vans and trucks, this data being used by leasing companies and manufacturers to assess future risk. This role entailed very early exposure to new models including extensive testing across Europe.
In 2016 I started up my own consultancy business dedicated to the LCV industry. In addition, my freelance written work has been used by a number of clients and I am a regular contributor to WhatVan? magazine. I’m also a judge for their annual ‘Van of the Year’ awards.
To relax, I enjoy travel and walking near my Yorkshire home.
