Reports suggest the used car market is currently buzzing with consumers flocking to car dealers and the motor trade is running seriously low on stock.
Car dealer forecourts are increasingly emptying with some big dealer groups reducing their used car stock by thousands of models.
Used car prices are rising too as demand outstrips supply and prices at auctions go ‘crazy’ as hundreds of bidders register for sales that only a handful would have done before the pandemic.
While new car sales remain sluggish, used cars are bolstering dealer profits with some of the big groups reporting a record month in June.
But can it continue? And what exactly is happening with the used car market right now? To find out we asked a panel of experts from across the used car motor trade, from auction houses to pricing experts, to give us an idea of what really is going on.
In this exclusive report on the used car market, here’s what our experts had to say.
Demand is likely to outstrip supply
Glass’s chief editor Jayson Whittington
The volume of used cars selling through auction channels ramped-up in June, although overall numbers are lower than normally expected.
Logistical issues, together with fewer part-exchanges coming from dealer groups due to the poor new car market is to blame, rather than a lack of demand.
Activity was strong, helped by the reopening of retail sites in England. Demand is likely to outweigh supply over the next three months which should be good news for residual values.
Big demand for seven year old cars plus
Cazana insight director Rupert Pontin (see YouTube video interview above)
The current retail market is buoyant with good retail consumer demand across most age and mileage profiles. There is a specific halo around seven year old plus cars and the popularity reflects the consumer demand for second or third cars for commuting purposes so they can avoid using public transport and the increased risk of catching Covid 19.
Current market conditions should prevail for the next six weeks or so until more used car stock comes to the market more easily when pricing may see adjustment.
The three-month view is more difficult as the country will have slipped into recession and unemployment is likely to rise, post furlough schemes ending, despite the government pledged support.
Dealers’ record sales and healthy bounce backs
Auto Trader commercial director Ian Plummer
Last month used prices recorded their largest monthly growth since January 2019. Along with the low supply of vehicles, it reflects the huge surge in demand in the market, with many retailers reporting either record sales or a very healthy bounce back.
Our research suggests it’s more than pent up demand at play. On the July 5, 38 per cent of circa 6,000 people on our marketplace said they intended to buy within three months – up from 35 per cent a month prior.
What’s more, 42 per cent said they were either buying a car for the first time or looking for an additional one. These new buyers coming into the market look set to offer a reassuring pipeline of sales over the coming months.
Used car prices of older cars still going up
Cap HPI head of valuations Derren Martin
The average movement of five-year old cars was 1.2 per cent up during June, while 10-year old cars increased by an unprecedented average of 5.7 per cent, at a time of the year when values invariably drop. Again, these have stabilised in July.
Convertibles and cabriolets continue to be sought after, particularly for models over three-years old, helped by the sunny weather and the short-term increase in some people’s disposable income.
The lack of new car activity has led to a shortfall in the numbers of part-exchanges being generated, so less natural source of replenishment for the franchise dealers. Logistics issues have also remained a problem for the industry meaning demand outstrips supply.
Sub-5k used cars are golden
Motorway.co.uk director James Bush
The used car market is buoyant right now. More people are returning to work but avoiding public transport, choosing to buy a used car instead – and we don’t see this changing any time soon.
Typical market seasonality trends are out of the window this year – these are normally driven by plate changes but with new car sales on the floor, we’ll continue to see steady growth in used car sales regardless of the calendar date.
Right now, sub £5k stock is golden and sub £12k stock is also doing very well. While the state of UK employment remains unclear, we expect the cheaper end of the market to stay strong.
Interest from used car buyers doubles
AA Cars CEO James Fairclough
The market has made tentative, but reassuring progress since lockdown restrictions on dealerships were eased. We’re seeing consumer demand bounce back with interest from buyers throughout June and July more than double the levels we experienced during the first week of lockdown.
In addition to the pent-up demand from buyers who were in the market before lockdown, and who still want and need a car, we’re also seeing a new type of buyer emerge – people looking for small city cars that we believe are trading public transport for a private car for their commute.
Although many consumers are clearly worried about their future finances, their need for a car has not necessarily changed. The used car market offers prices that can suit budgets of all sizes, which may make it more resilient than the new car market.
Usual sleepy summer replaced by busy months
Shoreham Vehicle Auctions MD Alex Wright
The car market is showing classic symptoms of supply and demand economics. Pent up demand from lockdown with supply struggling to keep up for a variety of reasons: fewer new-plate part exchanges, fleets extending lease contracts due to difficulty in getting replacements and used cars stuck in de-fleet compounds and on airfields waiting to be sold.
Supply is starting to improve and will continue during summer, but our normal sleepy used car summer months will be replaced by a busy July and August.
Prices will be strong throughout the year but softening slightly around September when used car supplies start to improve.
New car deals could put pressure on used prices
Aston Barclay’s Auctions MD Martin Potter
July has seen a continuation of high prices, although stock levels are increasing weekly. Fleets are starting to see volumes return to post Covid-19 levels which spells good news for wholesale stock availability and choice.
Finance houses meanwhile are working through a backlog of collections following cars coming off fleet during the lockdown. This has started to creep into the auctions.
Wholesale stock volumes are likely to continue to grow until the end of summer and then we will hopefully see a healthy plate change in September to feed part exchanges back into the market. Hybrid prices could start to cool over the coming months as aggressive new car deals put pressure on the 18-24-month old used car.
Dealers should put used car prices up
Autorola director Jon Mitchell
Our sister company Indicata estimates that dealers are short of 125,000 used cars currently compared with pre lockdown.
If dealers are unable to buy the volume of stock to fill their forecourt it’s about making sure they buy the best cars they can afford that are most saleable.
By analysing local pricing and demand they should also be increasing retail prices on some forecourt stock that is in high demand. Prices should be reviewed daily in such a hot market.
1,500 auction buyers logging in to some sales
BCA COO UK Remarketing Stuart Pearson
Momentum has continued into July and BCA has expanded its online remarketing programme significantly to meet the demand, running up to 20 sales in parallel at any one time, with 1,500 or more buyers logging in for some individual events.
Daily entries typically exceed 5,000 vehicles and demand across most sectors is ahead of what we would typically see at this time of year. There is increased interest in higher value, retail ready vehicles.
Demand for lower value, budget vehicles remains incredibly buoyant, maintaining the trend we have seen since the first days of lockdown and resulting in some unprecedented price increases.
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