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Used car market remains strong, Cap HPI reports

Date: 26 August 2020   |   Author: Sean Keywood

Used car values have risen slightly again in August, according to Cap HPI.

Its data shows a 0.2% increase in the average price for three-year-old cars, taking them to around 7% higher than they were in August 2019.

So far in 2020, March is the only month to have seen a drop in used car values, in the run-up to lockdown.

Cap HPI UK head of valuations Derren Martin said: "Looking at the retail advertised data received by Cap HPI, it is clear that across all mainstream sectors, prices have edged up slightly on average. This is unsurprising since trade prices have increased overall and consumer demand is so strong. 

"If ever there was a time to increase asking prices and maintain margins, the last three months has been it. These small average increases have not adversely affected days-to-sell."

"There appears to be pent-up consumer demand still with buyers wishing to avoid public transport, those careful buyers downgrading, and savers looking to upgrade - maybe instead of taking an expensive holiday abroad. There are certainly a number of interesting dynamics."

While both petrol and diesel car values increased, there has been a drop in prices for electric cars and hybrids.

Cap HPI says market feedback is that EVs continue to look expensive against petrol or diesel equivalents, and that there is price pressure around three-year-old EVs coming back into the market.

Martin said: "2017 saw an increase of around 40% in EV new car registrations over the previous year, so it is no surprise that as more vehicles come back into the used market, values will be exposed to supply and demand dynamics. 

"Some examples of models that have dropped in value at that age are the BMW i3, Kia Soul and Nissan Leaf."

As for hybrids, Cap HPI says they are suffering from a reduction in activity in the private hire industry, from which demand is usually strong.

Considering the overall market, Cap HPI expects prices to remain stable for now, but says that could change later this year.

Martin said that while reduced volumes of cars hitting the market would normally mean strong prices, other factors could come into play.

He said: "With the furlough scheme coming to a close and an economic downturn continuing, consumers are likely to become more prudent. 

"The pent-up demand from inactivity during lockdown will come to an end, as will people buying to avoid public transport - that was always likely to be a short-term dynamic. Those upsizing due to grants or savings made during the last few months will also wane.

"In short, predictions are that the next few weeks will remain stable, as there is currently no weakness in the market. However, from the end of September and into October, prices are likely to come under more pressure. What is clear is that viewing valuations in real-time and keeping vigilant will become more important than ever."