Used car values will hold firm throughout lockdown 3.0 unless click and collect is cancelled by the government, warns Cap HPI.
Derren Martin, head of valuations for the firm, said used car prices are not likely to ‘fall off a cliff’ during the current restrictions.
However, he warned that tightening measures on trading by the government, that some dealers fear could see click and collect services canned and home deliveries only, could cause prices to falter.
Martin said there was ‘concern’ among the dealers his team had been speaking to this week that increasing rhetoric from ministers on toughening the lockdown could see click and collect put on hold.
In an exclusive Car Dealer Live interview, which you can watch in full above, Martin said: ‘It does feel as though the government are dripping stuff in to toughen restrictions and from the dealers we have spoken to they are concerned that click and collect could be something that gets stopped.
‘I don’t know how imminent that is and we really hope it doesn’t happen.’
In a wide-ranging interview, Martin also covers:
- His predictions for amount of business dealers will do in lockdown
- His thoughts on pent-up demand at end of current restrictions
- His prediction on what impact lockdown will have on used car prices
- And a look back at what happened to used car prices in 2020
Martin agrees with Auto Trader COO Catherine Faiers who told us last week that dealers could see business halved in the third lockdown.
He said: ‘I listened to Catherine and she was spot on when she said that and they’re on the same page as us.
‘We speak to a lot of retailers and there are some that have got pretty much everyone furloughed, but overall most of the big ones are doing about 50 per cent of normal business. Some 40, some 60, but generally that is the figure where they are at.’
On his prediction for used car prices in the third lockdown, Martin said values have so far ‘barely moved’ and that he expects that will be the same into February.
He added: ‘Prices will probably be slightly weaker than where we would expect them to be but certainly not through the floor.’
He said Cap HPI had already seen some older used car prices strengthen and that the firm was confident there would be enough volumes of cars being sold to adjust values.
He said: ‘We don’t envisage that there will be a case of not moving values at all as we are confident we will have the data to do it.
‘We still have enough volume to cater for movements, as long as there are cars selling we need to be reflecting that.’
Martin says a lot more dealers have placed staff on furlough for this lockdown with many used car buyers among those sent home. This has already seen sales volumes drop to around 50 per cent in auctions in the first week of the year.
Martin said: ‘Most dealers are trying to do some sort of business. I am not aware of any that have closed, but there are some that have been furloughed.
‘I think the mood out there at the moment is a little bit down beat.
‘January is usually a real bumper time for dealers and into February so there is a little bit of disappointment even though levels are about 50 per cent.’
But the good news is Martin and the Cap HPI team do feel there is going to be a boost in demand when lockdown restrictions eventually ease.
‘I think there will be some pent up demand,’ he said.
‘If levels are 50 per cent now that means 50 per cent of people aren’t buying and are probably still looking.
‘If it is a necessity purchase now you’re probably going to do it, but others might be wary of click and collect. I think there will be some pent up demand, but I will temper that on the values side as there will be pent up supply.’
Martin explained that dealers hoping to see used car values rocket again will be disappointed as auctions companies have now got their logistics in order.
The trade is also likely to see many of the lease cars that were extended last year start dripping back into the market which will increase supply and cool prices.
‘We are predicting when they come back this year there will be some valuation drops, but it is never going to drop off a cliff,’ said Martin.
‘It might drop, but I would think it will be fairly gradual.’
And as a warning to dealers thinking about dropping prices now to attract customers during the lockdown, Martin said he didn’t think it was pricing that was keeping half of buyers away.
He explained: ‘I don’t think reducing prices will make much of an impact.
‘There’s no reason to reduce prices because I do not think people are not buying because cars are too expensive, it’s more lockdown, or that they might want a test drive, or want to go and see the vehicle first.
‘I would suggest dealers hold on price as much as they possibly can unless there’s one they have been stuck with for a particularly long time that they need to get rid of.
‘Overall, I would say just hold firm for now and buckle down for the next few weeks.’
To watch the full interview with Derren Martin click on the video at the top of this page. For more Used Car stories click here.