Used car values volatile but changes not seismic, says Cap HPI
The used car market is showing signs of recovery, with volumes increasing and early indications that value changes are “by no means seismic”.
Previously, the data company had said it would not adjust values as there was insufficient data to portray the market accurately and no values were moved between 24 March and 10 May.
However, rising volumes since then have led to Cap to publish new values. While wholesale records are still well below usual volumes, the company says there is now enough data for prices to be reflected to assist the industry in pricing; its analysis shows data volumes increased by 70% in the week commencing 4 May compared to two weeks earlier.
The firm’s data also shows values are far from freefalling. Average wholesale selling prices have increased steadily from around £4,000 to over £7,000, with vendors now more confident in selling slightly more expensive cars. Early indications suggest a 2% to 5% downward movement for some of those models and ranges older than five years.
Derren Martin, head of valuations UK Cap HPI, said: “The previous five years have seen an average drop of 4% during April and May at the five-year-old age point, and last year witnessed a 6.3% drop. So, the movements we are currently seeing in the middle of this pandemic are by no means seismic.”
Commenting on the approach, Martin added: “We are now in a position to confidently move values in line with the market, taking a prudent approach using our editorial expertise, no algorithms, to analyse the data. Initially, we will be moving values on older vehicles in mainstream sectors, where there is enough evidence to accurately reflect current prices, by looking at each generation of model individually. No overall market movements will be applied. At the current time, younger used cars will not be moved in value as that end of the market is still very much in a hiatus.”
Stressing the need for such a prudent approach, Cap said outliers, unrepresentative volumes and prices would not be reflected to move values. It also made the decision not to move values of younger cars or of cars in niche sectors, due to the paucity of data available. Currently, valuation movements are only being made on cars between around five and 20 years old.
The firm’s analysts are also researching retail advertised prices, in large volumes, although the firm said movements on retail price have been negligible.
Martin concluded: “We can see how retail and trade values operate differently in the market and this continues to be true during the pandemic. It’s more important than ever to take a careful, considered view from the evidence and it is likely to be a volatile time for used car prices over the next few weeks, whilst supply and demand dynamics work themselves out. We would recommend the industry keeps a very close eye on our daily valuations as they may move in either direction.”