Fall in used car values not due to lockdown, says Cap
An ongoing fall in used car values is not due to the latest lockdown but instead part of a seasonal readjustment following a bumper few months.
That’s the result of latest analysis by Cap HPI, which has revealed a decline in trade prices by 2.1% in October and by over 2% so far in November; equivalent to around £450 in total on a typical three-year-old car.
The falls come on the back of months of rising or stable prices, but Cap said there were signs that values were already declining before the latest lockdown.
It also noted that while trade values are seeing a decline, retail values remain relatively steady for the moment, with retailers having “generally held their nerve over recent weeks, adjusting advertised values only by small amounts when necessary”.
Explaining the fall, Derren Martin, head of valuations at Cap HPI, said: “With pent-up demand from the first UK lockdown and consumers buying to avoid public transport both now declining, trade buyers are wary of paying previous high prices for cars that may now sit on their forecourts for longer and will potentially need to be reduced. This has led to a decline in trade prices across the board.”
But he added: “It is important to remember that, when comparing the same type of car at the same age and mileage point today to a year ago, prices are some 5% ahead of where they were, when normally we expect a decline, as models deflate in price whilst moving through their lifecycle. This upward movement that the market has experienced is not unprecedented, but history shows us that it is generally unsustainable.”
Cap also said that while volumes of cars being sold in the trade are lower than prior to the latest lockdown, they are currently only down by around 15%.
But it did warn dealers to be on their guard; with a drop in trade prices now, this could eventually filter through to retail prices.
Martin continued: “Invariably trade prices adjust earlier than retail ones, so it is essential to track what to pay in the wholesale market. With many smaller models of cars around 10% higher in value than they were a year ago, some realignment was always likely and the final quarter of the year is generally the time when values drop. We see no cause for alarm, and many consumers are still buying used cars through Click & Collect.
“Even with this realignment, used car prices are still higher than even the most optimistic would have predicted a year and certainly six months ago. It is essential for buyers and sellers alike to track trade prices in real-time at times like this.”