Dealers are likely to see further short shortages, higher prices and even greater competition for vehicles, warns Cox Automotive.
While the used car market is performing positively at the moment, the firm’s latest data highlights the motor trade could be about to enter a challenging second half of the year.
Cox Automotive’s insight report for May found average prices of used cars fell by £828 to £5,812 last month, representing a 12 per cent month-on-month decrease.
However, Cox Automotive said figures from its Manheim division indicate average mileage increased by nine per cent in May, from 60,721 in April to 66,171 in May and the average age by 11 per cent over the same period.
Cox Automotive said this shows that dealers are continuing to expand their stock profiles to include older and higher mileage vehicles.
CAP Clean performance was recorded at 100.11 per cent and first-time conversion was 83.2 per cent.
The data chimes with similar sentiments expressed by Cazana’s Rupert Pontin.
Speaking on the Car Dealer Podcast last week, Pontin said while there was ‘no doubt’ Cazana is seeing an increase in used prices, there isn’t the ‘huge jump upward’ others had seen.
Cox Automotive’s Philip Nothard said: ‘Used vehicle supply is being hampered by challenges in the new car market. This is making competition for used vehicles fiercer as fleet and leasing companies turn their attention to sourcing “nearly new” cars, eventually driving prices, mileage, and ages higher at auction.
‘We’re hearing reports that the semiconductor shortages and subsequent aluminium and rubber supply chain constraints are likely to impact the third and fourth quarter sectors.
‘This is why I am urging the industry to be cautious over recent optimistic figures, as they potentially give false hope that things are returning to normal.
‘The shortages in materials to build new cars could be far more damaging for manufacturers, suppliers and dealers than the entire effects of the pandemic.
My advice is that dealers maximise their profitability margins where possible, as used vehicle prices will continue to increase over the coming months, until the new and nearly new car markets recover
‘Manufacturers may be forced to decide between building cars or LCVs, and which market they support as they focus on profitability and maximum production. This will have a knock-on effect on the already strained used car market and rental sectors.’
Data shared by Cox Automotive’s US business highlights the UK’s May 2021 new car sales performance compared to the rest of Europe in the pre-pandemic month of May 2019.
Germany, Italy, France and Spain all suffered double-digit declines again last month, compared to the same time in 2019, however, these were less severe than those observed in April 2021.
The UK’s 156,737 new car registrations were down 14.7 per cent and represented the smallest fall out of the five nations.
Nothard continued: ‘While supply remains limited, retailers continue to capitalise on the available stock to support consumer demand, leading to strong conversions and inflated prices.
‘Dealers are reviewing stock profiles, increasing age and mileage limitations, and in some instances retailing brands and models outside of their comfort zones.
‘There are also reports of retailers holding increasing levels of part-exchanges, that they would ordinarily place in the wholesale environment.
‘A cautious attitude and response to the rest of 2021 is required, as challenges to the new and used car markets continue.
‘My advice is that dealers maximise their profitability margins where possible, as used vehicle prices will continue to increase over the coming months, until the new and nearly new car markets recover.’