9:27 am, August 1, 2022
Despite there being an end to massive increases in used car prices recently, the ongoing shortage of new car stock means there’s no ‘cliff edge’ in sight for used values.
That’s the word from Cox Automotive in its latest quarterly insight round-up, AutoFocus.
Along with its view of there being no imminent plunge in prices, the company has also stated it has revised its quarterly and full-year used car market forecasts.
The most likely scenario, says Cox Automotive, is for Q3 to end on 1.89m transactions – 7.3 per cent down year-on-year, two per cent down on the 2001-2019 average, and 9.2 per cent down on Q4 2019 figures.
In this scenario, Q4 would end on 1.63m transactions – 0.4 per cent down year-on-year, one per cent below the 2001-2019 average, and 9.4 per cent down on 2019 figures.
The company says it expects prices for the majority of sectors to take ‘years’ before returning to pre-pandemic levels.
As such, it expects 2022 to see 7.05m used car transactions – a 6.4 per cent decrease year-on-year, 4.4 per cent reduction on the 2001-2019 average, and 11.2 per cent fall when compared with the most recent pre-pandemic performance.
This is a 4.8 per cent downgrade on Cox Automotive’s previous forecast.
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Philip Nothard, insight and strategy director, Cox Automotive, said the changes reflect a 31m shortfall in new vehicles over the past two years, which will cause supply constraints within the used car market.
‘The used car market has been grappling with a shortage of vehicles for some time,’ he explained. ‘This, coupled with high demand, has caused prices to rise to record levels.
‘While the sector has become accustomed to fewer vehicles and higher prices, the full extent of the global new vehicle shortfall will have a significant effect in the coming months.’
He added: ‘Challenges exist mostly in the zero to six, and sub-12-month market, although we will soon see more of the same within the one-to-three-year sector, particularly over the next 24 months.
‘Eventually, shortages will trickle down to the late three-year and five-year market.’
Commenting on there being no ‘cliff edge’ in sight for used car values, Nothard said: ‘Most retailers have seen remarkable profits during the past few months from increased margins, full retail prices for new vehicles, minimal discounts, and a lack of targets – a dynamic the industry has not seen for a while.
‘While supply and demand challenges still exist, many retailers display innovation and inventiveness to position them strongly against several headwinds.
‘All this being said, we do not anticipate the values for the majority of sub-sectors to return to pre-pandemic levels for several years, if at all.
‘Therefore, while current pricing conditions remain, and stock supply remains low for many manufacturers, it is more important than ever for retailers to grasp supply dynamics at a model and derivative level.’
