Used car prices are set to remain ‘unusually strong’ in June despite the ongoing effects of coronavirus – and the outlook for 2020 is positive.
Speaking exclusively to Car Dealer Magazine, head of valuations at Cap HPI Derren Martin said the firm was seeing strong demand from consumers which was resulting in used car values remaining strong.
And while the market will feel pressure as the economic effects of Covid-19 are felt later this year, the market won’t see a downturn as bad as the 2008/9 recession.
‘At the start of lockdown values were very weak, but we’ve seen a steady increase since then,’ Martin told us.
‘Cap percentage is normally 94 or 95 per cent because vehicles are more heavily damaged, but at the moment values are around 99 per cent – so prices are strong. We’ve seen that increase since showrooms opened on June 1, and a lot of the values we’re analysing we are moving upwards.’
Martin confirmed Cap HPI was now analysing and moving values for cars under five years. For six weeks during lockdown, the firm didn’t move prices for this sector as it ‘didn’t have enough faith in the data’ and volumes were ‘around 17 per cent of normal’.
Since then, though, Cap HPI has had ‘good’ demand from consumers but reckons the market is experiencing ‘a bubble effect’.
‘Overall, it’s positive, although younger used cars aren’t quite so positive and we have dropped some values there, but the drops here aren’t very big – one or two per cent, and that could recover,’ said Martin.
‘The average price is up by around £150. That’s unusual for this time of year and especially unusual when you consider we didn’t move any values. This time last year values dropped quite considerably over the summer months.’
Martin said that older, German premium cars are performing well, but in particular city cars as buyers downsize from more expensive cars or are buying their first used car to avoid using public transport.
He added that the outlook was positive, not negative.
‘It’s certainly not bad news, but I do think we are in a temporary bubble of pent-up demand, and there are factors such as supply lines not all being open and car showrooms being at lower capacity.
‘This is causing a bottleneck where demand is outweighing supply, but when that supply catches up values will drop – that’s natural.
‘There will be some pressure on pricing towards the end of this year but it won’t be particularly untoward. It will be a bit heavier than we would normally expect due to the economic downturn, but it won’t be as bad as it was in 2008 or 2009.
‘Values and prices will stay strong through June. In economic downturns, used cars tend to be robust and people buy used cars rather than new ones.’
Click on the main image to see the interview in full
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