Consumers remain unaware of why used car prices have risen so sharply and the industry could have done more to educate them, dealers have said.
Prices rose to record levels last year due to constraints with new car supply, leaving some customers bemused as to why dealers were charging so much.
Several have even accused the automotive industry of bumping up the prices themselves in order to make more money and cash in on the pandemic.
It is an accusation that has the potential to create huge mistrust between dealers and their customers and industry leaders have now been speaking out.
Peter Smyth, director at dealer group Swansway, told Car Dealer: ‘Some customers believe there is some sort of conspiracy but I just wish it was that sophisticated to be honest.
‘First of all, in used cars, the market is so big that you couldn’t do that because we all compete in the same marketplace. It’s difficult to have a cartel running prices when every single car is individual!
‘The fact is that used car prices are still high. Even I look at them and think they’re high but just of late there has been a slight correction in the market.
‘The truth is it is still very very difficult to supply new vehicles to customers, which is affecting the value of used cars.
‘You’re always going to have those economic factors coming into play.
‘Have we done enough to inform consumers about that? I don’t know. Probably not. We have all been concerned with getting through the pandemic, selling cars and making money.
‘One thing is for sure though, I can absolutely guarantee that I have never ever picked up the phone to another dealer group and said “by the way, let’s keep our used car prices artificially high to try to rip the customers off”.
‘To suggest that would be absolute hogwash.’
Jamie Caple, from Car Quay, agreed that consumers are generally unaware of why prices are so high but said neither he or his staff had experienced negative comments because of it.
He said: ‘Maybe I’m not giving customers enough credit but generally I don’t think a lot of them are even that aware prices have gone up.
‘Obviously for us in the industry [we] know what’s going on but if you’re not speaking to people you wouldn’t really know.
‘We have had the odd comment of “oh you lot are doing well at the moment” but nothing nasty or anything like that.’
Speaking to the Car Dealer Podcast, Motorway sales director James Bush said that high prices haven’t been explained properly to customers since they reached record levels last year.
He said: ‘It got communicated really strongly on the consumer side that prices were going up. Everyone was being told their cars were worth a fortune and now is the best time to sell.
‘It doesn’t seem to have gone the other way now prices have softened just so they’re aware of what is actually happening.
‘The car dealer has to front that. They look like their prices are too high but in fact the market is coming down so they need to relay that to the public so they’re aware of what’s going on, and I just don’t feel like that’s been communicated as strongly as we come out of that.
‘Having a two-sided marketplace where we have our customers who are sellers and our customers who are dealers, one of the biggest things for us is making sure that our sellers are aware of everything that goes into a car dealer’s preparation and costs of selling a car.
‘They may see, for example, the car they sold for £4,000 is up for sale for £6,000 – that’s not £2,000 profit for a car dealer, obviously, but that’s what they see.
‘It’s about trying to educate people in terms of transport costs, prep costs, advertising, VAT margin and things like that.
‘That’s really important so people see that these dealers are great. They’re doing a great job and they’re not trying to fleece people, they’re just trying to make a living’.
‘Trade values had to be passed on to consumers’
Valuation expert Derren Martin said it was inevitable that consumers would face higher prices, due to 30 per cent rises in trade values.
Cap HPI’s director of valuations added that many customers may not understand that prices are set by supply and demand.
He told Car Dealer: ‘Trade values increased by around 30 per cent last year and this had to be passed on to the consumer or dealers would not make a margin.
‘With demand high and supply constrained due to new car shortages, price increases were an unprecedented feature of the market.
‘Many consumers may not understand that used car prices are set by supply and demand dynamics. Some dealers increased margins last year, but again this is a feature of the market when demand is high.
‘Of course, consumers had to pay more for purchases but also their part-exchange, if they had one, would have likely gone up by a similar percentage, offsetting some of what they paid.
‘If they were savvy, they would also have hunted around for the best trade-in value for their car.’