Demand for used cars has steadily increased throughout the 12 weeks of the third lockdown – with many buyers not putting off car purchases to wait for dealers to reopen on April 12.
Cap HPI’s latest Market Overview report shows that many customers haven’t delayed buying until they can test drive a used car once again as the lockdown has gone on.
The valuations experts say some car dealers are operating at 90 per cent of normal levels in March for used car sales while most car supermarkets are around 50-60 per cent.
Head of valuations for the firm, Derren Martin, said: ‘Some premium franchise dealers have actually reported business levels ahead of where they would normally expect – many consumers remain active in making aspirational purchases with money saved or government backed funds received.
‘Bearing in mind that, the country has now been in lockdown for almost 12-weeks, with car showrooms physically closed, this sector has posted some amazingly positive sales figures.
‘What a difference a year makes. From March 23, 2020, businesses closed their doors and the future was uncertain – how would they cope without physical customers? Sales rates dropped by 98 per cent.
‘In March 2021, while under almost identical restrictions, sales rates overall are now only around 10 per cent less than normal.’
Cap HPI says some car dealers have started to reduce car prices on models that have stuck around a while and there have been some ‘tactical’ price reductions to attract buyers on to dealer websites.
Martin said it’s clear dealers have worked hard to improve their online offering and that has paid off.
He added: ‘Retailers have now been working within the constraints of the pandemic for a full year and what is clear is how far they have improved their online presence and overall distance selling procedures since Covid-19 first hit the UK.
‘They have also had to work harder than ever to achieve the levels of sales and to handle the increased number of competitors – not just the traditional ones in their local area.
‘This increased online competition was always on the horizon but has certainly accelerated over the last year.’
Older used cars are still very much in demand, says Cap HPI, with prices still holding firm.
Martin added: ‘One theme, both over the year and in the last few weeks, has been increased demand for older cars.
‘Many dealers have reduced the number of cars that they dispose of to the trade, realising that there is margin to be made by retailing more of their part-exchanges. This is particularly the case for older, premium models.’
Martin says that demand is likely to increase as showrooms reopen and this is likely to push up prices, particularly in the wholesale market.
‘We have already seen buyers returning from furlough and becoming more active with their purchasing, said Martin.
‘Over most of Lockdown 3, there has been a reticence to replenish for stock or even replace sold orders due to diminished demand, but as we suggested last month, now would seem to be a good time to buy in expectation of strong consumer demand.’
Cap HPI is not predicting the market to be quite as strong as it was after the first lockdown as there are ‘far fewer’ people who have held off buying.
‘Pent up demand will be present, but not to such a large degree,’ said Martin.
‘The theme of consumers making aspirational, big-ticket purchases is likely to continue, particularly with uncertainty over holidays this summer.
‘How better to cheer yourself up than buying a new car? It is likely that the strength in the market will remain in place for April and May.’
The full Cap HPI report can be found here.
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