According to estimates by the VW finance division, the sharply increased prices for used cars have reached an all-time high and are likely to fall again soon. “We’ve reached the peak,” said Sales Director Anthony Bandmann, looking back on the fiscal year that was coming to an end. Recently, second-hand vehicles have often been 20 to 25 percent more expensive than the long-term average.
The CEO of Volkswagen Financial Services (VWFS), Christian Dahlheim, also suspects “that used car prices will normalize again”. They went down a bit, the company said. People are more cautious about recession expectations.
Delivery problems with microchips, long waiting times and price increases for new vehicles mean that many private customers and companies are switching to used cars – which is also driving up prices there. VWFS can benefit from the trend because many of the group’s returned cars from leasing or financing contracts are usually still quite young and can therefore be resold with high residual values. At the same time, trading in used vehicles, also from external brands, via open Internet portals is becoming increasingly important.
Customers could postpone buying further
However, record inflation and the energy price shock are now causing considerable uncertainty, Dahlheim warned. As a result, consumers and companies could continue to put off buying a car. “Hopefully we’ll see more new cars again, and hopefully better economic development again,” said the manager.
In the Volkswagen Group, VWFS is responsible for financing, leasing, car subscriptions and new packages for long-term rentals. In addition, Braunschweiger offers insurance and other services, and they should play a major role in the development of a comprehensive mobility platform. In June, a consortium of bidders took over the rental company Europcar, which they want to turn into a central service hub for Europe’s largest car group. The goal is an integrated system from car sharing to classic car rental and car subscriptions to multi-year leasing. A project on this is already underway in the Austrian capital of Vienna.
For the time being, the used car business is still “tailwind”, said Bandmann. Further investments are planned in the online platform Heycar, which is now also represented in France, Great Britain and Spain in addition to Germany. “We want to be one of the largest used car sellers in the world.” Other countries could join in 2023. The resident dealers of their own group brands will be closely involved, also because of additional opportunities in the maintenance and insurance business.
Many factors affect the business
“2022 was characterized by various special influences,” said Chief Financial Officer Frank Fiedler, for example on the consequences of the Ukraine war, the end of years of low interest rates and the lack of new vehicles. The profit in the current business should therefore be below the 5.7 billion euros of the previous year, but still be comparatively good, above all thanks to the high residual values of many used vehicles and lower risk costs. “We will move somewhere between five and five and a half billion euros. Probably more in the direction of five and a half.”
There are no concrete figures yet. Bandmann indicated that the total portfolio of contracts at VWFS has decreased compared to 2021: “The portfolio is shrinking.” However, the net balance of additions and disposals says nothing about the profitability of the individual deals. On the contrary, the increased car prices tended to result in higher income per contract, according to Fiedler. However, this and the high residual values of used vehicles will probably not be sustainable for long. “2023 will be a difficult year and an uncertain year.”
VWFS does not dare to give a detailed outlook because of the shaky economy. “But we will probably have to reckon with higher risk costs again,” said Fiedler. “Everything is getting more expensive. It will not be possible to price everything through.” In addition, interest rates are rising again. “They will also weigh on us in terms of earnings.”
