12:00 pm, June 23, 2020
Delays in opening car auctions and logistics companies still not working at full capacity is throttling used car supply to dealers.
With strong used car sales at dealers after they reopened their doors on June 1, many are reporting a surge in demand for used cars.
Car dealers believe pent-up demand during lockdown has been compounded by customers ditching public transport to get around and customers spending cancelled holiday cash on a used car.
These strong sales are draining supply and dealers that have bought from auction are now struggling to get their cars delivered.
Car Dealer reported at the weekend on the ‘buying frenzy’ at auctions where used car prices are rising fast and dealers are fighting over stock. Now, that problem is been exaggerated by dealers not being able to get hold of the stock they’ve bought.
Used car pricing expert Rupert Pontin from Cazana confirmed there was a problem and he doesn’t think it is going to go ease for over a month.
He said: ‘There is a problem with the supply of used cars, and this will continue for up to six weeks.
‘The Vehicle Remarketing Association report significant challenges within the logistics and remarketing supply chain caused by the need to maintain social distancing.
‘This is restricting the speed with which wholesale stock can be collected, remarketed and delivered. One major auction company has spoken of difficulties extending for some time.’
Car dealers are buying stock in online auctions, which have generally replaced physical auctions for now, but they are struggling to get hold of the cars once they’ve purchased them.
Big Motoring World boss Peter Waddell told Car Dealer that he’d bought hundreds of cars recently but hadn’t been able to get them delivered from auction houses with many held up for days.
Mike Jones, chairman of ASE Global said: ‘The delay in the opening of the auctions and the logistics companies is certainly causing an issue.
‘Even where we have online auctions open, retailers are struggling to physically get hold of the stock once they have purchased. As a result retailers are having to be even more inventive to source stock and it is vital that this continues.
‘We have always seen used cars lead the charge as we exit a recession and we need to ensure that friction in the operation of the market does not hamper the recovery this time.’
The relaxation of social distancing rules to one metre will help auction houses, but it will still take time for the wheels to start turning again with any great momentum.
Valuations expert Derren Martin, from Cap HPI, said he has also seen problems in logistics but thinks the problems will ease as we enter autumn.
He said: ‘There are issues sourcing stock at the moment. The logistics bottleneck does not help. There are still people on furlough from transport companies, so they are not yet at full capacity.
‘There are also issues with social distancing in this area that slows the whole process down. This issue should ease over the coming months and more stock will be in the market, particularly from lease extensions that will come to an end.
‘The supply/demand balance is likely to be tipped at the end of the summer or into the autumn in our opinion.’
Franchised dealer Sean Kelly, boss of Vines BMW, added the situation had been ‘exacerbated’ by the lack of normal supply chains.
He told Car Dealer: ‘This is a classic case of short-term supply and demand imbalance.
‘The demand and speed of sale of used cars is better than the most optimistic forecasts during lockdown, combined with a resolute holding of used values, has created a feeding frenzy in the wholesale market.’
Neil Smith, director of car supermarket group Imperial Cars, told Car Dealer his firm believes the current used car sales surge is a ‘window of opportunity’ that will last between four and six weeks.
He told Car Dealer Magazine: ‘It seems that demand has very much shifted to used vehicles over new since exiting lockdown so we could be in for an extended period of demand.
‘We’re certainly seeing less supply. No doubt if the demand remains for a sustained period of time this will inevitably result in a shortage and we’ll address that when and if it starts to impact on us.’
- More Used Car stories in our dedicated section here
- Used car bidding war frenzy at car auctions as dealers fight over shortage of quality stock
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