Now is the time to buy a used car before prices rise when car dealerships reopen on April 12, believes Cap HPI’s head of valuations.
In an exclusive video interview, Derren Martin said consumers and the motor trade should snap up cheaper stock before showrooms reopen and send prices skywards.
Martin said the used car market has suffered from several months of falling prices in the wholesale market with values dropping since October.
The falls followed a surge in prices across the used car market after lockdown one eased as consumers rushed back to the market.
While the rush following lockdown three won’t be quite so intense, Martin believes that the pent-up demand that is out there will push prices up across the board once again.
He said: ‘It’s a good time to buy a used car for the trade and for consumers.
‘I think prices are going to go up once April 12 comes around and I would be out there looking to buy now.
‘I certainly wouldn’t be holding back buying at the moment and think it’s a good time to buy. Especially if people are looking in the short term because I think prices will go up.’
Martin said the dealers Cap HPI have been talking to are averaging sales of around 65 per cent of normal during the third lockdown.
He said this 35 per cent drop off, coupled with the extended finance agreements that will need renewing, will see an increase in demand.
Martin said: ‘If you think around 65 per cent on average of consumers are buying, 35 per cent aren’t, they’ll be back in the market in the short term especially when the car showrooms are open.
‘It’ll be just after Easter and the weather will be getting better, so going out to look for a car will almost be something to do.
‘I think you’ll get those 35 per cent of people not buying now who will then, plus those people whose cars are due for renewal anyway around this time, as it’s a busy time for this around March and April for that.
‘That pent up demand will be strong, certainly for April 12.’
Price rises
Martin wouldn’t be drawn on what sort of price rises could be seen for used cars, as it will ‘depend on age, brand and a number of things’.
But he said Cap HPI is already seeing values for older cars rise, as well as sports cars – the latter of which have outperformed the rest of the used car market.
Martin said: ‘I would expect older vehicles to go up more in percentage terms. Some of those demand factors like avoiding public transport are probably not there any more, but there is definitely some strength.
‘It could be because if you’ve got an older car now and it dies you’ve got to go and replace it, whereas if you’re just looking and want a younger one there’s not a necessity to buy at the moment.
‘It’s difficult to predict how much they’ll go up by.
‘We are already seeing older cars go up in price in the trade data and that’s what happened in June last year after the first lockdown.
‘I would say it’s a good time to be out there buying for consumers and in the trade too – my advice would be buy now as I think prices will go up in the trade.’
Despite this, Martin doesn’t think the period after lockdown three ends will be quite so strong as the period after lockdown one.
‘If you think back to April and May last year the industry was pretty much closed,’ he said.
‘The volumes were maybe up to about 20 per cent of normal at best towards the end of May, so there was a lot of pent up demand.
‘There were a lot of people who were panicking that they couldn’t go on public transport so went and bought a car – that won’t happen this time.
‘I think there will be strong demand this time but it will be for a shorter period of time and it won’t be for as long as last year. It lasted all summer last year and that won’t happen this time.’
Martin on MPVs falling out of favour
One area that has been weak is MPVs. They’re been falling for a number of months and that is continuing this month. That is bucking the levelling off trend we’re seeing in other cars. MPVs aren’t really desirable.
We’ve seen some weakness in models like Galaxy, Alhambra, vehicles like that prices have come down as they’re not a popular vehicle any more. The public seem to want SUVs more than MPVs.
We’re seeing weakness on hybrids and electric vehicles again too. That’s a continuous theme while older petrol and diesel vehicles are doing really, really well.
Martin on the sports car market
We’re still seeing people going out there and buying stuff they like the look of and will look good on their driveway. They’ve maybe not spent money last year or recently, probably not going on holiday, so there’s still some success in that sector.
Sports cars have been our strongest sector in the last year – sports cars have gone up seven per cent in the course of a year. When you think about how much some of those cars are, that’s a lot of money.
Overall we’ve now seen average values around 3 per cent down year on year, because of the weakness we’ve seen in the last few months, so sports cars up seven per cent is rather remarkable. Convertibles are doing well too.
There’s no sign of that dying down.
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