Stock uncertainty could hit used car market recovery, Cox Automotive warns
28 April 2021
Author: Sean Keywood
Enthusiastic predictions for the used car market may not come to fruition because of uncertainty over stock levels, Cox Automotive has warned.
The automotive services firm said that with manufacturers struggling with new car supply, and potential delays to defleet programmes, there was likely to be a knock-on effect on volumes entering the used car market.
It said this could confound previous hopes that the release of rental and fleet vehicles onto the market would boost recovery.
Cox Automotive insight and strategy director Philip Nothard said: "Our latest dealer sentiment survey revealed that 54% of dealers were confident that used car transactions would increase in 2021 compared to 2020. This comes despite dealers feeling the effects of spending the first three months of the year in lockdown - signalling that they are feeling optimistic about the rest of 2021, now that in-person retail is once again possible.
"However, the news that manufacturers are struggling with the supply of new cars will be felt at dealers when it comes to obtaining stock. This means that the lease and contract hire sector can't get new product and therefore can't defleet many of those low mileage, nearly new cars that were hoped to enter the used car market in significant volume in the coming months.
"We had hoped that a regular and well-sized supply of defleeted vehicles would prove key to restoring a thriving, competitive used market. However, our latest warning does reflect the expectations of dealers, with 82% expecting supply to remain the same or decrease, and 33% predicting that wholesale prices would go up."
Cox Automotive has found that while some used car dealers have seen evidence of pent-up demand following the easing of Covid-19 lockdown measures, this has not been universal, while volumes remain down compared not only with expectations for this time of year, but also the period last summer following the first lockdown.
The firm is forecasting a new car market performance for Q2 down 5.9% on the pre-pandemic average, and says a best-case scenario might have used car market activity broadly in line with pre-pandemic levels.