Used car values may never return to pre-pandemic levels, Cox Automotive says
08 December 2021
Author: Sean Keywood
Values on the UK used car market may never again drop back down to the levels seen before the Covid-19 pandemic, according to data firm Cox Automotive.
It said the buoyant state of used car values seen for many months had continued in November, with auction firm Manheim seeing a record 16.8% increase in average sale price month-on-month, which also represented a 33.8% increase year-on-year.
Although Cox Automotive's insight and strategy director Philip Nothard predicted the market would be more stable by mid-2022, he said that the pandemic had rapidly accelerated the online and digital marketplace compared with two years ago, and also pointed out that new car supply issues meant that around 1.4 million new vehicles had effectively been lost from the market, never to turn up as second-hand vehicles, meaning used car stock constraints would also continue.
Writing in Cox Automotive's AutoFocus Q4 magazine, Nothard said: "Back in July, we asserted that the used car market has never been more critical to the overall health of the automotive industry than it has been in 2021. The last few months have given more weight to this suggestion.
"While prices have now increased for eight consecutive months, recent signs point towards a potential softening in the market. And while it remains the case that prices overall have continued to rise, the situation is becoming increasingly complex, with some models starting to see significant price decreases.
"Moreover, some figures we've observed are misleading, as it doesn't represent live market data where many models that saw an increase at the start of the month, which dropped off by the end."
Nothard added that it was important to remember there was traditionally a slow period for the market ahead of Christmas.
He continued: "Prices are expected to drop in line with usual market cycles, so current prices still reflect a high demand with a low supply market. With prices as they are, dealers are becoming increasingly cautious, but as the year draws to a close, they will require stock for the new year, so prices are unlikely to drop significantly.
"We expect current market conditions to continue throughout Q1 2022, and it's entirely possible that we are seeing a revised benchmark for the used vehicle parc."