5:44 pm, November 3, 2020
Used car prices are poised to drop during England’s second lockdown.
That’s according to Cap HPI head of valuations Derren Martin, who told Car Dealer founder James Baggott: ‘My personal view is I think they are going to go down. I think it will be a bit of a run in to Christmas now.
‘Obviously, there are some people that will have some spare cash again, but people do tend to be more careful this time of year.
‘A lot of people are losing their jobs as well, so the economic impact of this is starting to feel more real.’
He added: ‘Values tend to come down in the final quarter anyway. We can’t get away from the fact that used car prices are high.
‘On average, values are three to four per cent higher than they were a year ago, so there’s still a little room in there for values to drop.’
Baggott commented that there had been some price reductions, such as with Motability fleets, and Martin said others may follow in dropping prices, which could drive the market down.
‘We get accused of driving prices down but we don’t do that – we purely reflect what we’re seeing.
‘My gut feeling is that values will come down between now and Christmas – not dramatically, they’re not going to drop off a cliff.
‘We’ll still be in a better place than we would have thought we’d have been a year ago even without the pandemic with regard to used car values, and then there could be a bit of a recovery in January.’
He pointed out that businesses were better set up this time round to trade online to consumers and auctions. ‘We’re in a very different situation this time round…The industry is open.
‘We feel that we will get the volume of sales records, plus there’s retail evidence as well for us to still be able to move valuations. We’re supremely confident that the valuations will be kept going this time round.’
He said that Cap HPI had already seen a strong week of dealers buying cars from auctions.
And although it won’t be reducing its prices based on just some individual companies that do, since it reflects data from across the industry, he commented that there were opportunities to be had.
‘So why not go out and buy them? Because we all know what happened at the end of the last lockdown – prices went up.’
Cap HPI dropped its values by just over two per cent moving into November, but Martin said the market tended to be strong in January so now could be a good time to go out and buy.
The end of the Brexit transition period could lead to new car prices going up, he commented, which could then pull up used car prices.
His message to dealers unable to operate during lockdown and who might be worried about their stock losing value was they had to decide on whether they needed to lower their prices.
‘They certainly don’t need to completely knock them dramatically, but they may need to make some small adjustments to prices, because we’ve seen trade market coming down.
‘Trade comes down before retail generally, and I think people will be concerned to pay high prices trade for cars that may come down in retail.
‘Maybe adjust them down slightly but it’s not going to come dropping off a cliff, so they are going to come out of this the right side.’
Martin reiterated that Cap HPI would be looking for a general pattern. ‘We are adjusting values every day and we will be reviewing as we go. We’ll keep the industry updated with what’s happening with values.’
And he thought it was unlikely that a more stringent lockdown could be brought in that could lead to sales stopping and Cap HPI having to pause values.
‘I think there will be plenty of volume still going through – maybe slightly less than normal, but there will be enough volume out there.’
Watch our interview with Derren Martin in full at the top of this post
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