11:27 am, February 7, 2022
Dealerships should be prepared for another year of demand for used vehicles outstripping supply.
That’s according to Cox Automotive as stock remains hot property while the new market continues to recover.
The latest edition of its quarterly publication AutoFocus forecasts an increase in used car sales versus 2021, although it’s still down on pre-pandemic averages.
Cox’s most-likely scenario for 2022’s first quarter sees it ending on 1.956m used car transactions.
That’s a 15.9 per cent year-on-year increase, 4.2 per cent up on the 2001-2019 average, but 3.2 per cent down when compared with the most recent pre-pandemic 2019 performance.
Meanwhile, the second quarter is likely to end on 2.003m transactions – a 7.6 per cent decrease year on year, 4.2 per cent up versus the 2001-2019 average, and a 1.5 per cent decrease compared with 2019.
Cox says the most likely scenario for the full year sees 2022 finishing on 7.701m used car transactions.
That equates to a 4.2 per cent increase year on year compared with 2021’s forecast of 7.392m and would be 4.4 per cent up on the 2001-2019 average, but three per cent down versus the most recent 2019 pre-pandemic performance.
Meanwhile, Cox subsidiary Manheim’s auction data for January 2022 shows the average age of vehicles entering the remarketing sector at 100.9 months – up from the 89 months of the same time last year.
The average mileage also rose from 64,996 to 70,162.
But despite the older vehicle profile, they’re still selling at high prices because of stock shortages, says Cox.
The average selling price went up by £1,917 from last year’s £6,133. Cap Clean conversions also increased from 93.39 per cent to 98.26 per cent, while first-time conversions rose from 77.6 per cent to 83.3 per cent.
Philip Nothard, insight and strategy director at Cox Automotive, said that although the numbers were continuing to go up, key wholesale indicators were starting to fall more in line with pre-pandemic levels versus the same period last year.
‘Consideration must be given here to the months leading into the pandemic in the UK before the shutdowns towards the end of March 2020.
‘The used car market was performing ahead of expectations, with the first two months of 2020 considerably ahead of previous years.
‘In January 2021, although the government had lifted restrictions, the sector had established click-and-collect programmes, which meant they could enjoy some vehicle sales, but consumers remained cautious.
‘Therefore, sales remained relatively low compared with projections.’
Nothard added that new car production issues were expected to remain until 2023, as well as a continuation of fewer used vehicles.
That in turn will lead to more wholesale competition, in turn driving up values and increasing retail prices.
‘Manufacturers are slowly getting to grips with their production issues, but the situation is unlikely to improve as the year progresses.
‘The new market recovery will be a prolonged and gradual process.
‘As a result, we will not see a flood of stock enter the market, but rather a gradual increase as the backlog of orders for new vehicles gets cleared, in turn generating much-needed stock for the used market.’
And following months of unprecedented levels of rapid rises in used car values, he believes a ceiling may have already been hit.
As supply issues are resolved over time, Nothard expects values to decrease, although he warns that it will be gradual and at a much slower rate than many are hoping for.
‘The concern is that values will start to decrease at a time when profitability per unit is more vital than ever, but current supply-and-demand levels won’t allow that to happen.
‘As long as new car supply issues remain and used cars continue to be dripped into the market rather than released like a tsunami, then natural market dynamics dictate that values will remain at current levels for some time.’
