USED car values continue to drop during Lockdown 2, but it is part of a seasonal readjustment following a bumper few months for dealers and not a direct result of the second Lockdown itself.
This is according to the latest analysis of trade-to-trade sales data from cap hpi which said that after months of price increases or at the very least, stability, October and November have saw wholesale values dropping within its live valuation service.
It identified a decline in trade prices by 2.1% in October and by over 2% in November equating to around £450 in total on a typical 3-year old car. However, cap hpi confirmed that these values were already declining before the latest Lockdown.
What is noticeable is that whilst trade values are seeing a decline, retail values remain relatively steady. Whilst retailers have generally held their nerve over recent weeks, adjusting advertised values only by small amounts when necessary, this has not been the case in the wholesale, or trade market.
Derren Martin, Head of Valuations at cap hpi said: “With pent-up demand from the first UK lockdown and consumers buying to avoid public transport both now declining, trade buyers are wary of paying previous high prices for cars that may now sit on their forecourts for longer and will potentially need to be reduced. This has led to a decline in trade prices across the board.
“It is important to remember that, when comparing the same type of car at the same age and mileage point today to a year ago, prices are some 5% ahead of where they were, when normally we expect a decline, as models deflate in price whilst moving through their lifecycle. This upward movement that the market has experienced is not unprecedented, but history shows us that it is generally unsustainable.”
While volumes of cars being sold in the trade are lower than prior to the latest lockdown, cap hpi said they are currently only down by around 15% although dealers need to be on their guard; with a drop in trade prices now, this could eventually filter through to retail prices.
Martin added: “Invariably trade prices adjust earlier than retail ones, so it is essential to track what to pay in the wholesale market. With many smaller models of cars around 10% higher in value than they were a year ago, some realignment was always likely and the final quarter of the year is generally the time when values drop.
“We see no cause for alarm, and many consumers are still buying used cars through Click and Collect. Even with this realignment, used car prices are still higher than even the most optimistic would have predicted a year and certainly six months ago. It is essential for buyers and sellers alike to track trade prices in real-time at times like this.”
Shoreham Vehicle Auctions believes the used car market will make a come back in January after pent-up demand from the November lockdown 2.0 and December’s seasonal Christmas slowdown.
And the used van market looks set to continue its record demand and price growth as companies buy replacement or additional used vans out of necessity through business growth.
That’s the view of Managing Director Alex Wright who predicted a used car market bounce back in January 2021 that will mirror June 2020 when the market came out of its first lockdown.
Wright believes consumer demand will kick in between Christmas and New Year when motorists invest in upgrading their car rather than booking a family holiday.
He expects the £10,000 to £40,000 price brackets to continue to be the most popular in the market.
“The smart dealers are already buying used cars during lockdown at lower prices to feed the expected consumer demand from the end of December. We saw prices wobble on the first day of Lockdown 2.0, but since then prices have softened, but the market has found a new level where the trade seems comfortable to buy stock,” said Wright.
“The market knows it will be short of dealer part exchanges come January because the volume of new car deliveries falling as dealers only trade online during November. They are getting themselves ready for another record trading period in late December and into Q1 2021,” he added.
A polar opposite from the used car market is the used van market which from early November saw prices and demand continue to rise. Prices have nearly doubled in some sectors of the market during 2020.
“People replace their used cars as they fancy a change or because they want a new model with the latest equipment on it while used van buyers replace their vehicles out of necessity. The economy is still turning and big sectors like construction are still trading during lockdown 2.0.
“With many sectors such as home delivery continuing to grow even during lockdown, companies and contracted drivers are looking to buy a used instead of a new van due to the persistent delivery delays from manufacturers,” said Wright.
A recent Tuesday SVA commercial vehicle sale saw 175 buyers logged online buy 160 used vehicles online from around the country. The sale achieved a 98% conversion rate and this trend looks set to continue throughout 2021.