6 minute read
Investigation
INVESTIGATION What is happening to used car prices right now? We asked 10 experts to help us make sense of the current market
by James Baggott
@CarDealerEd
Reports suggest the used car market is currently buzzing, with consumers flocking to car dealers and the motor trade running seriously low on stock.
Car dealer forecourts are increasingly emptying, with some big dealer groups reducing their used car stock by thousands of models.
Used car prices are rising too, as demand outstrips supply and prices at auctions go ‘crazy’, with hundreds of bidders registering for sales that would only have attracted a handful before the pandemic.
While new car sales remain sluggish, used cars are bolstering dealer profits, with some of the big groups reporting a record month in June.
But can it continue? And what exactly is happening with the used car market right now? To find out, we asked a panel of experts from across the used car motor trade, from auction houses to pricing experts, to give us an idea of what’s really going on.
In this exclusive report on the used car market, here’s what our experts had to say.
Good news for residual values in months ahead
Glass’s chief editor Jayson Whittington
The volume of used cars selling through auction channels ramped up in June, although overall numbers are lower than normally expected.
Logistical issues, together with fewer part-exchanges coming from dealer groups because of the poor new car market, is to blame, rather than a lack of demand.
Activity was strong, helped by the reopening of retail sites in England.
Demand is likely to outweigh supply over the next three months, which should be good news for residual values.
Dealers should put some used car prices up
Autorola director
Jon Mitchell
Our sister company Indicata estimates that dealers are short of 125,000 used cars currently compared with before lockdown.
If dealers are unable to buy the volume of stock to fill their forecourt, it’s about making sure they buy the best cars they can afford that are most saleable.
By analysing local pricing and demand, they should also be increasing retail prices on some forecourt stock that is in high demand. Prices should be reviewed daily in such a hot market.
Auto Trader commercial director
Ian Plummer
In June, used prices recorded their largest monthly growth since January 2019. Along with the low supply of vehicles, it reflects the huge surge in demand in the market.
On July 5, 38 per cent of circa 6,000 people on our marketplace said they intended to buy within three months – up from 35 per cent a month prior.
What’s more, 42 per cent said they were either buying for the first time or looking for an extra car. These new buyers coming into the market look set to offer a reassuring pipeline of sales over the coming months.
Unprecedented rise when values usually drop
Cap HPI head of valuations
Derren Martin
The average movement of five-year-old cars was 1.2 per cent up during June, while 10-year-old cars rose by an unprecedented average of 5.7 per cent at a time when values invariably drop. Again, these have stabilised in July.
Convertibles and cabriolets continue to be sought after, particularly for models over three years old, helped by the sunny weather and short-term increase in some people’s disposable income. Lack of new car activity led to a shortfall in part-exchanges, so less stock for the franchise dealers.
Steady growth will continue no matter what time of year
Motorway.co.uk director
James Bush
The used car market is buoyant right now. More people are returning to work but avoiding public transport, choosing to buy a used car instead – and we don’t see this changing any time soon.
Typical market seasonality trends are out of the window this year – these are normally driven by plate changes, but with new car sales on the floor we’ll continue to see steady growth in used car sales regardless of the calendar date.
Right now, sub-£5k stock is golden and sub-£12k stock is also doing very well. AA Cars CEO
James Fairclough
tentative but reassuring progress since lockdown restrictions were eased. In addition to the pent-up demand from buyers who were in the market before lockdown, we’re also seeing a new type of buyer emerge – people we believe are trading public transport for a private car for their commute.
Although many consumers are clearly worried about their future finances, their need for a car has not necessarily changed. The used car market offers prices that can suit budgets of all sizes.
1,500 auction buyers logging in to some sales
BCA COO UK remarketing
Stuart Pearson
BCA has expanded its online remarketing programme significantly to meet demand, running up to 20 sales in parallel at any one time, with 1,500 or more buyers logging in for some events.
Daily entries typically exceed 5,000 vehicles. There is increased interest in highervalue, retail-ready vehicles.
Demand for lower-value, budget vehicles remains incredibly buoyant, maintaining the trend we have seen since the first days of lockdown and resulting in some unprecedented price increases.
The usual sleepy summer will get much busier
Shoreham Vehicle Auctions MD
Alex Wright
The car market is showing classic symptoms of supplyand-demand economics – pentup demand from lockdown with supply struggling to keep up for various reasons, including fewer new-plate part-exchanges.
Supply is starting to improve and will continue during summer, but our normal sleepy used car summer months will be replaced by a busy July and August.
Prices will be strong throughout the year but softening slightly around September when used car supplies start to improve.
Big demand for cars seven-plus years old
Cazana insight director
Rupert Pontin
The current retail market is buoyant with good retail consumer demand across most age and mileage profiles. There is a specific halo around sevenyear-old-plus cars, and the popularity reflects the consumer demand for second or third cars for commuting purposes so they can avoid using public transport and the increased risk of catching Covid-19.
Current market conditions should prevail for the next six weeks or so until more used car stock comes to the market more easily, when pricing may see adjustment.
Watch our Rupert
Martin Potter
New type of buyer emerging from lockdown
The market has made
Pontin video here
Wholesale stock volumes set to grow for now
Aston Barclay Vehicle Remarketing Group MD
Martin Potter
July has seen a continuation of high prices, although stock levels are increasing weekly. Fleets are starting to see volumes return to postCovid-19 levels, which spells good news for wholesale stock availability and choice.
Finance houses are working through a backlog.
Wholesale stock volumes are likely to continue to grow until the end of summer, and then we will hopefully see a healthy plate change in September to feed some part-exchanges back into the market.
