9:00 am, October 15, 2024
The outlook for the used car market is very strong for the rest of 2024, despite concerns over stock shortages and customer confidence.
Speaking to Car Dealer, Paul Hyne, Black Horse and Lex Autolease commercial director, said the predicted outlook for the used car sector is a strong one even though prices are levelling off.
We’re seeing retail demand for new cars down, with ground being lost to fleet and leasing, but there’s a real contrast with the used car market,’ he said. ‘Lower cost and reduced risk is likely to be pushing consumers towards the used car market.
‘While used car transactions are roughly now stable year on year, that strength is at a very high level – there’s robust demand in the used car market.
‘Prices are starting to come down from the very big highs that we saw post-pandemic, which means there’s more value out there now for those looking to trade up. The contrast is that there’s less equity and fewer deals to give customers the deposit for that trade-up.’
Hyne added: ‘We’re also seeing dealers being very selective on the cars they’re buying at auction – there’s a real nervousness in acquiring stock. Dealers are favouring cars that require little work and can turn quickly.
‘Used car prices are probably lower than where they need to be, because it would appear dealers want to sell them quickly at a lower price rather than holding onto them for perhaps another couple of weeks. That’s not sustainable and will put pressure on residual values.’
The dealers that can pivot and focus on other revenue streams are the ones that will reap the rewards later this year and beyond, believes Black Horse’s consumer distribution director, Preston Rogers.
‘It’s a challenging time for the sector right now and that’s from the pandemic and subsequent semi-conductor shortages which dramatically affected new cars sales volumes. On top of lower volumes, chip-affected cars from around 2021 to late 2022 may be missing features like the wireless phone charger, or head-up display. The customer won’t necessarily know this, but dealers do, and they are holding out for the best cars and selecting the best from wholesale.
‘Another thing we are very aware of are the dealers who solely rely on young used cars. Peter Vardy was the first major Group to come out and say they were closing used car supermarkets, and we’ve since seen similar announcements from Cazoo and Carshop. If you are a business that has traditionally just bought two- to four-year old cars, then you are thick in the Covid shortage.
‘Strong businesses can pivot in times like this, to change market offering and focus on other revenue streams like aftersales. It would be beneficial to be picking up slightly younger used premium cars and particularly EVs – the value in used EVs is impressive.’
Final word from Hyne: ‘Overall, there is strong demand but there is a notable apprehension, and underpinning all of this is a low level of under-five-year-old cars coming into the used market. The outlook though, is positive.’
