John Lewis of the BVRLA is absolutely right that CAP has a responsibility to tell it like it is without ‘spooking’ the market. That is why we have not chased headlines during the downturn by jumping on the doom and gloom bandwagon.
It’s natural that journalists and magazines want some shock value (I know - I was a journalist for 11 years). But it’s our job at CAP to offer sensible and sincere responses to media enquiries. For example, two trade publications recently requested our view on the supposed disagreement between BCA and Manheim on used car disposal values. In reality there was no controversy because both organisations were naturally reporting on different samples of vehicles and we said so.
A similar issue is regularly raised about the two used values guides. Inexperienced observers assume that when they are publishing different values on the same vehicles one must be right and the other wrong. Unfortunately - at least for those who enjoy a good controversy - it’s not that simple. Both guides are taking different raw data, analysing it in their own way and publishing values which are then used by their respective customers in different ways. Try explaining this to the average consumer motoring journalist and they rapidly lose interest - it’s not the ‘industry row’ they are looking for.
I once asked an economist at CAP what the ‘truth’ was when two sets of economic data apparently contradicted each other. His answer - ‘it depends on the sample’ - is acutely relevant today. For example, CAP’s senior analyst Jason Owens identified an underlying reduction in residual values back in September 2007. How did this square with the apparently buoyant returns seen at that time in the market? It is all down to the sample.
In a healthy market any ‘basket’ of vehicles at a specific age and mileage point will be joined by new or heavily refreshed models as the months go by. These are naturally more desirable and therefore command a premium over the outgoing version. This often has the impact of raising the overall ‘basket’ value which is then interpreted and often reported as rising residual values in general.
CAP identified some time ago that, to give a more faithful picture of the market, it was necessary to identify and adjust for the distorting impact of new and facelifted vehicles if we were to report on residual value trends with 100% integrity. This means there is a difference between the average value of a standard ‘basket’ of cars at 3yrs/60,000 miles and actual asset depreciation, which is what really impacts on our customers. Any debate over whether the direction of residual value trends matters to those carrying the risk can be crudely quashed by the simple fact that it does not actually matter as long as the risk holder knows where they will be at disposal time.
Whether a car returns £10,000 or £10 on disposal is in itself not the issue. Being able to plan and finance effectively for future risk is what matters. We are passionate about helping them to do that, no matter where the market is heading, and the only way to do that is to behave with absolute integrity, which means neither talking the market up or down. You can sum up our manifesto as openness with responsibility and integrity.
