6:40 pm, May 18, 2020
Dealers have been urged not to panic when it comes to used car prices when they reopen for business.
That was the message from car checks and vehicle valuation expert Cazana when chief executive Tom Wood and director of insights Rupert Pontin appeared on Car Dealer Live.
Wood said that it had been receiving ‘a huge number of calls and requests for information for the market’ as dealers ready themselves to fully reopen with June 1 being the likely date.
‘Our main message is don’t panic. Don’t take the view that you need to be shifting lots of your stock on day one.
‘We’re seeing a lot of pent-up demand from people who are ready to go out and buy vehicles, and there is likely to be a shortage of stock in the first few weeks, so the stock that you’ve got is probably the stock that you’re going to be stuck with for the first few weeks, so don’t sell it short.’
He added: ‘Don’t waste the opportunity when things reopen. Don’t make hard price cuts to try to attract customer interest, because we believe it’s there and that it will flow from 1st June.’
Car Dealer founder James Baggott, who was interviewing the executives, wondered how dealers should contend with low offers – by as much as 25 per cent under the asking price in some places – from customers who thought the market had dropped hugely so dealers would be desperate to sell cars.
Pontin warned there could be a stock problem with supply delays for the first few weeks, since auctions wouldn’t be up and running for a while, and trucks would be here there and everywhere so wouldn’t be able to deliver vehicles in any volume at any speed.
And he told dealers: ‘Don’t be tempted to drop that price, because you may not be able to replace that car for some weeks.
‘The only thing that we can do is try to make sure there is plenty of publicity around the fact that there will be shortages of supply and you’re not going to strike lucky Mr Customer just by bidding someone three, four or five thousand pounds below market value on a vehicle.’
What had been happening to used car prices in the lockdown, Car Dealer founder James Baggott asked, adding that he had heard conflicting stories.
Pontin said they’d seen a continuation of the change in pricing by dealers as they tried to stay competitive, adding that the prices of petrol vehicles had gone up by 0.6 per cent since the start of lockdown – circa £120 per vehicle – while diesel had dropped by about 0.7 per cent during lockdown, equal to about £100 per car on average.
Meanwhile, battery-electric vehicles had gone up by 1.72 per cent – £509 per vehicle – although some were high-end testers. This was using asking prices, not transactions, for them all.
Wood stressed that it wasn’t Cazana’s job to predict transacted prices, though. ‘The most valuable thing for us to track in the market is where do you need to set the price for this vehicle for it to transact?’
Pontin added that the sub-£10,000 car had moved the most – up by 3.8 per cent. There had also been an increase in the £10k-£20k price bracket of just shy of one per cent. A weakness in the £20k-£40k sector had been detected, though, with a drop of almost one per cent.
He surmised that with some restrictions in public transport and people unlikely to want to travel on public transport, they would probably go for the cheaper vehicle to get themselves on the road, with Wood saying the highest proportion of owner-change transactions Cazana had seen during the lockdown had been at the cheaper end of the spectrum.
And what did the medium term hold for used car prices as we move further into the year and what Baggott called ‘a very, very dark recession’, with many people out of work, not much money around, and low consumer confidence?
That was difficult to answer, replied Pontin, adding that there was an alternative view, as some other jobs had been created and people on furlough weren’t spending as much money as before because they couldn’t go out and spend it.
‘It’s not clear to me that it’s going to have a huge detrimental impact,’ he said. ‘Retail pricing is going to be determined by the volume of supply as much as it is around the consumer demand.
‘I think we are going to see consumer demand there but it will perhaps be at a reduced level. That should balance with the logistical operations that are going to be struggling somewhat to move cars through the process.’
His personal view, though, was that there would be some strengthening of pricing for a while that may then tail off slightly, but he wasn’t expecting retail prices to dip significantly.
As for what dealers should be stocking up on for the restart, he favoured diesel vehicles – as they still had a place in the market, he said – as well as battery-electric plus petrol small cars. ‘Where there’s been less pollution because of lockdown there has been more of a growth around being cleaner for the environment,’ he said.
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