The wholesale used car industry is being starved of repossessions as drivers turn their cars into cash rather than hand them back to finance companies.

Alex Wright, SVA’s managing director

The sector had been expecting tens of thousands of used cars to hit the market during 2021 and 2022 after car repossessions were put on hold by the Financial Conduct Authority (FCA) during the pandemic.

While the FCA lifted its ban on 31 January 2021, the steady stream of used cars expected by auction companies has never hit the open market.

Instead, Shoreham Vehicle Auctions said that drivers who are behind with their monthly payments have been avoiding vehicles being repossessed by turning to a growing number of car buying service companies that will buy their used car online and settle all unpaid finances.

In a used car market where vehicles are in short supply and prices are high, it means drivers are making hundreds or even thousands of pounds on the sale whilst protecting their credit score.

“It’s good news for drivers who have fallen behind with their car repayments, but this trend has contributed to the wholesale market being short of used cars,” explained Alex Wright, managing director of Shoreham Vehicle Auctions.

The summer slowdown has also hit wholesale volumes, as drivers have invested in family holidays rather than replacing their car.

But Wright predicts the market could warm up again in September and October, despite the current economic climate.

Although many drivers are being put off replacing their used car by rising household bills, he believes they will be forced into looking to buy a replacement as their cars get older and the running costs rise.

“We don’t believe used car demand will go through the roof during the winter until drivers get a better handle on how challenges like rising energy prices will impact their available cashflow. However, used cars are still in short supply so we won’t experience a major fall in prices.

“It will be spring 2023 before we have a better idea on future used car trends and this will depend largely on whether new car supply improves,” he added.