'Make hay' as values rise, used car sellers told
20 April 2021
Author: Sean Keywood
Factors including reduced company car take-up mean a temporary lift in used car demand in expected.
Organisations selling used cars should 'make hay while the sun shines', as the market is expected to enjoy a short boost with the relaxation of Covid-19 lockdown measures.
That's according to Cap HPI head of valuations Derren Martin, one of the speakers on a webinar held by the organisation about the effect of the pandemic on vehicle values.
He said that with the recent reopening of dealerships, values were on the increase, and that this was expected to continue for a few weeks ahead - with company car market trends one factor in increased demand.
He said: "[Used car] supply levels are steady, and with the potential for new car supply to continue to be hampered by semi-conductor shortages, this could lead to buyers turning to used cars rather than new, as well as a shortage of part-exchanges in the market.
"There are also many companies and individuals reviewing their decision to offer or take a company car. This could lead to more buyers in the used market."
However, Martin warned that rising values could prove short-lived.
He said: "Further down the line used car supply may increase, from lease extensions coming back, and cars returning that were registered three to four years ago when volumes were higher.
"Also, whilst government support remains in place via the furlough scheme, the economic impact [of redundancies] has not yet been felt. When it does, there could be an impact on values.
"In the next few weeks though it could be a case of 'make hay while the sun shines' for remarketers and retailers. Values are on the up for now."
Martin did note that one exception to rising values was electrified vehicles.
He said: "Alternatively fuelled vehicles continue to drop [in value] by more than petrol and diesel cars.
"Demand doesn't match the increased supply. Many of these cars are expensive, and there are no incentives for the used buyer. And barriers still remain to widespread adoption, including charging times and range anxiety."
Cap HPI global senior forecasting editor Dylan Setterfield told the webinar that although the market had seen rising values in recent weeks, this had been more gradual than predicted.
He said: "The market was slightly slower to pick up than we'd expected following the announcements we had on the schedule for the reopening of dealerships.
"Recent weeks have been stable, but still not exceptional. At some stage we expect demand to drop, and at the same time we should also be seeing increased supply - and not just from fleets, but also PCPs [and] repossessions. Used car volumes have been well below normal for some time, and those cars haven't disappeared, they will come back."
Setterfield added that with the scheduled end of furlough in September, Cap HPI was predicting the market outlook to be similar to a normal seasonal progression for the rest of 2021, but then feature a slower start to 2022.
However, he added: "The further we go out the more positive the picture is, as the lower new car registrations last year and this year result in reduced used car supply in those future years."