Used vehicle values may never return to pre-pandemic levels

A YEAR of frustration caused by new vehicle production problems and COVID restrictions has  transformed the wholesale vehicle market. 

Cox Automotive said wholesale vehicle  values will show signs of stabilisation throughout mid-2022 as the market attempts to get back to  some form of normality. However, the coronavirus pandemic has rapidly accelerated the online and  digital marketplace to what existed two years ago.

As a result, it’s also entirely possible that a new  benchmark for used vehicle values has been reached that may never dip to pre-pandemic levels. 

Philip Nothard, Insight and Strategy Director warned that there is no tsunami of used stock on the horizon, and an increased focus on the  detail will be required as the shape of the market evolves.

It also can’t be ignored that around 1.4  million new vehicles have been lost from the market, which will never enter the used vehicle parc.  Although the impact in the sub-12-month market has been felt already, it will without a doubt have a bearing on the sector for years to come. 

Writing in Cox Automotive’s AutoFocus Q4 magazine in December, Nothard said: “Back in July, we  asserted that the used car market has never been more critical to the overall health of the  automotive industry than it has been in 2021. The last few months have given more weight to this  suggestion.

“While prices have now increased for eight consecutive months, recent signs point towards a  potential softening in the market. And while it remains the case that prices overall have continued to  rise, the situation is becoming increasingly complex, with some models starting to see significant  price decreases.

“Moreover, some figures we’ve observed are misleading, as it doesn’t represent live  market data where many models that saw an increase at the start of the month, which dropped off  by the end. 

“It’s important to remember in the final month of the year that this is traditionally a slow period as  retail activity slows ahead of Christmas. Prices are expected to drop in line with usual market cycles,  so current prices still reflect a high demand with a low supply market. With prices as they are,  dealers are becoming increasingly cautious, but as the year draws to a close, they will require stock  for the new year, so prices are unlikely to drop significantly.  

“We expect current market conditions to continue throughout Q1 2022, and it’s entirely possible  that we are seeing a revised benchmark for the used vehicle parc.”