A perfect storm of coronavirus and Brexit is brewing in the new and used car markets which will likely see values fall and not recover until 2022, new data suggests.
Glass’s has published new figures that compare the last economic downturn of 2008/9 with the ‘inevitable’ recession that will hit later this year and how values will be affected.
The company says that while values will be stronger than 2008/9, the outlook isn’t clear and the market won’t recover until 2022.
Average prices for a three-year old car fluctuated between £7,000 and £7,500 in 2007, before rising to £8,000 in 2008. But with the collapse of Lehman Brothers in the USA, the average price fell to £6,000 by the start of 2009.
Fast forward to 2020, and while a recessions looms, Glass’s is confident values will be more resilient this time around and also stronger than the rest of Europe.
Glass’s anticipates new car supply will be affected by trade deals between the UK and EU and the negative affect of these deals will drive up prices of new cars. In turn, demand for used cars will be positive and prices will strengthen.
Commenting on the data, Rob Donaldson, car editor – Glass’s, said: ‘In reality it is still unclear where values will head now that dealers have opened their doors following the easing of the shutdown.
‘A reasonable assumption is that most dealers will try to hold their advertised prices, offering little discount.
‘However, with static cash flow for the past 12 weeks, getting a deal done may win the day.
‘On the positive side there is no doubt there will be some pent-up demand for both new and used cars, but this may ebb away quickly, especially in the new car arena as unemployment rises after the furlough scheme ends with consumers likely to tighten their belts.
‘That said, transport is a necessity for many and whilst using public transport is unappealing at this time, demand for used cars, especially the cheaper end of the market, could stay strong throughout the recession.
‘Additionally, new car registrations have been in decline for two years prior to the coronavirus pandemic. This will directly negatively affect the supply of used cars and is likely to lead to stronger used car values moving forward.’
Donaldson said that this is a critical time for the UK car market, and while the volatility of 2008/9 is not expected, the short-term outlook is uncertain.
‘Overall, we anticipate that there will be a fall in values in 2020 and 2021 with recovery in 2022. The majority of these falls will be driven by the economic effects of Covid-19 coupled to Brexit driving lower demand in the UK market.’
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