The used car market normally draws an ‘m’ shape across the year. Values accelerate rapidly into spring, bottom out in summer, lift again in early autumn then end then the year on a low. There are always variations, but that is usually about the size – or shape – of it, unless something such as, say, a financial crisis or a pandemic happens. 

August, then, would normally herald one of the two lowest points of the year for both prices and the number of sales, and it is testament to the market’s purity – it is, after all, driven by sheer supply and demand – that summer holidays still have such an effect, but that is not the case in 2020. Contrary to the usual dip, this summer has propped up the market after the dearth of sales throughout lockdown. 

Cap HPI reported a rise in values of three-year-old, 60,000-mile models in July for the first time since 2009, albeit by a modest 0.4%. 

“We have witnessed a relatively dramatic increase during June, then a stabilisation in July, and it would appear that values have peaked but are remaining at or around that level for now,” says head of valuations Derren Martin.  

It may be a different demographic – the average sticker price of 900,000 mixed used cars rather than Cap’s typical ex-fleet fodder – but Auto Trader reported a 4.6% increase during July to £13,888, its biggest such jump in two years. The classified specialist said petrol and diesel prices were especially strong, the former up 5.6% to £12,604 and the latter by 4.1% to £14,705, its biggest monthly rise since September 2014. 

Auction companies told of record numbers of vehicles passing through their halls during the previous month, along with more or less steady prices for typical ex-fleet vehicles. 

“Compared with June and July [combined] in 2019, we were up 37% in terms of volume of vehicles sold,” says Andy Brown, CD Auctions’ outgoing managing director.  

“Some of that is because we have got new customers on board and some of it is the number of vehicles that perhaps didn’t go out to leasing companies at the end of March and the throughput of that into the post-lockdown time.”

BCA noted a similar swell, claiming a 30% month-on-month increase in vehicles sold, a record number of which were online – almost 6,300 on 29 July alone. Values remained down year-on-year; the company’s average July selling price was £8,517, down from £9,153 (-6.9%) in 2019 and £48 (0.6%) below June’s average, but that is 74.6% higher than April’s £4,876. 

Despite the increase in used sales, auction companies and valuation specialists have partly credited the market’s recent strength to a still sluggish supply of vehicles from leasing companies, as a portion of the widespread contract extensions that began in March have yet to trickle down to second-hand buyers. That, and the less-than-abundant travel opportunities, have left those who retained their jobs keener to splash out on used cars. 

“There is still a bit of a lag in vehicles coming back [from contract hire],” explains Kevin Bicknell, Ogilvie Fleet’s remarketing manager. “A lot of people are still on furlough. so when that member of staff comes back, is that job going to be there and do they [the company] want the outlay of a new vehicle? Probably not when they can extend the current one.

“The other thing is that a lot of contracts have been extended purely because we can’t get new cars. So yes, we are getting cars back, but not as many as we would have expected.” 

August is predicted to be another relatively good month for sales, if a little less eager than June and July, bucking the seasonal trend once again. 

“Demand shows no signs of slowing into August, [but] we have seen that supply constraints are working their way through, so we expect the growth rate we have seen in recent months to stabilise somewhat, rather than continue to accelerate,” says Richard Walker, director of data and insight at Auto Trader. 

“At this time of year, you [normally] tend to have quite a high stock level because everything is coming back ready for September registration,” adds Bicknell. “Whereas this year. there is not that much stock around and traders will pay that little bit extra to get the right stock – and we could all do with more of it.” 

KeeResources has made few significant changes to its valuation data for that very reason. While Cap paused alterations during the lockdown period but resumed in May, the former company has kept its figures more or less static due to what it describes as a lack of serious data for traditional three or four-year-old ex-fleet cars.

“The real volume of data available is still quite small,” says director of manufacturer liaison Mark Jowsey. “In terms of the early information available on what has been disposed of since we came out of lockdown – relative to a strong marketplace – there isn’t enough data of normality. Other than being completely model year compliant – when we completely start afresh in our construction of the residual value for a new car – we haven’t made any significant changes [to used car values]. 

“There has been an increase in retail pricing and the demand for smaller, more affordable mainstream manufacturer product seems to be quite strong, but for ex-contract hire product, that is not telling you anything about demand or pricing – it is that they [auction companies] can’t get the cars.”

Business Car has previously discussed used car experts’ concerns that sales and values could be in for a fall after the summer, and the consensus remains the same. 

“I think unemployment is going to go up in September/October when the furlough ends,” says Bicknell. “We will then have to be a bit smarter about the way we sell vehicles – look down several different avenues rather than just putting everything into auction.” 

“There will be price drops because the demand will fall away as the unemployment starts to hit. I think that is inevitable at some stage,” adds Brown.

The used car market’s traditional double peak and dip is therefore looking a lot flatter than is usual, but the final three or four months of the year are likely to see it tailing off even more than usual. Depending on its severity, that drop could represent the start of a return to a seasonal norm. 

“Quarter four will be the time when we will get a better fix on the economic circumstances that will then drive the new and used car performance,” adds Jowsey, who adds a cautionary note for those excited by the recent spate of strong values.  

“We all know that there is lots of business bouncing around at the moment and prices are still quite strong, but when does that stop? When have we satisfied the immediate pent-up demand that was there?” 

Even if the back end of 2020 resembles something close to normal for used car values, next year is not expected to herald a return to conventional seasonality – at least not to begin with. Bicknell thinks vendors should brace for lower-than-average values into the first few months, while Brown is of the opinion that normal service has no chance of resuming until 2022. 

“We will probably have a longer stagnant period over Christmas and I think January is probably not going to be as good as it has been in previous years,” says Bicknell. 

“I don’t think things will settle down until 2022 because so many things can happen,” adds Brown. “How quickly does the economy bounce back? Does Covid hang around? Do the spikes come and we have to do more lockdowns? It is too unpredictable to make any firm judgement calls. 

“Who would have predicted, when we came back after lockdown, that the market would be as strong as it is at the moment, and you would actually be raising Cap values at this time of year?”