Cars360 – Will Used Car Prices Drop After Lockdown?

Cap HPI has warned that unless Click and Collect is revoked by the government, the prices of used cars will remain stagnant during Lockdown 3.0.

The firm’s head of valuations, Darren Martin, said prices of used cars are unlikely to ‘fall off a cliff’ during the current restrictions.

However, he warned that tougher measures on trade by the government, that some dealers fear could only click and collect packaged and home delivery services, could lead to a drop in prices.

Martin said there was ‘concern’ among dealers his team was talking about this week that the increasing rhetoric from ministers on tightening the lockdown could be seen on click and collect hold.

In an exclusive Car Dealer Live interview, which you can watch in full above, Martin said: ‘It looks like the government is leaking stuff to tighten restrictions and the dealers we’ve talked to are concerned. that click and collect be something that stops.

‘I don’t know how imminent it is and we really hope that doesn’t happen.’

In an extensive interview, Martin also included:

• For the amount of business dealers will make their predictions in lockdown
• His thoughts on the pent-up demand at the end of the current sanctions
• His prediction on how the lockdown will affect the prices of used cars
• And a look at what happened to used car prices in 2020
• Martin agrees with Auto Trader COO Katherine Fair who told us last week that dealers could see business halve in the third lockdown.

He said: ‘I listened to Katherine and she was spot on when she said so and they’re on the same page as us.

‘We talk to a lot of retailers and there are some who have all largely discharged, but overall most are doing around 50 per cent of the larger normal business. Some 40, some 60, but that’s usually where they are.

On his prediction about the prices of used cars in the third lockdown, Martin said that prices have “barely shifted” so far and he expects the same to happen in February.

He Added: 

‘Prices will probably be a little weaker than where we’d expect them to but certainly not through the floor.’

He added that CAP HPI has already seen a consolidation in prices of some used cars and the firm was confident that a sufficient quantity of cars would be sold to accommodate prices.

He Added: 

‘We do not envisage that there will be a case of values not moving at all because we believe we will have the data to do so.

‘We still have enough volume to complete the movements, as long as the cars are sold, we need to reflect that.’

Martin says that many dealers have put employees on leave for this lockdown, many of whom have been sent home to old car buyers. This has resulted in a nearly 50 percent drop in sales volume at auctions in the first week of the year.

Martin said: 

‘Most dealers are trying to do some sort of business. I don’t know of anyone who has been laid off, but there are some who have been discharged.
‘January is usually a real bumper time for dealers and February is a bit disappointing even though the level is around 50 per cent.’

Lockdown Bounce:

But the good news is that Martin and the Cap HPI team think that demand is going to pick up when lockdown restrictions are eased.

‘I think there will be some stalled demand,’ he said.

“If the level is 50 per cent now, it means that 50 per cent of people are not buying and are probably still watching.

‘If it’s an essential purchase you’re probably going to make it, but others may be wary of clicks and collections. I think there will be some stagnant demand, but I will keep it on the price side as there will be a shortfall in supply.

Martin explained that dealers hoping to see the price of used cars rocket again will be disappointed because auction companies have now got their logistics.

The business is also likely to see many leased cars that were extended last year dripping back into the market leading to increased supply and cold prices.

“We’re predicting there will be some valuation drops when they come back this year, but it’s never going to fall off a cliff,” Martin said.
‘It may fall, but I think it will happen quite slowly.’

And as a warning to dealers thinking about slashing prices now to attract customers during the lockdown, Martin said he didn’t think it was pricing that was keeping half the buyers away.

He explained: ‘I don’t think reducing prices will have much effect.

‘There’s no reason to reduce prices because I don’t think people aren’t buying because cars are too expensive, it’s more lockdown, or that they want test drives, or want to see vehicles first.

‘I would suggest dealers hold on to the price as much as possible, unless there is one they have been stuck on for a particularly long time that they need to get rid of.

Buy & Sale Used Car on – www.cars360.co