Used Car Prices On the Rise – But For How Long?
Vehicle value and data experts Cap HPI have reported that used car values have risen every single month since April. September continued the trend that began during the Coronavirus Lockdown, seeing benchmark values based on a three-year old vehicle (or 60,000 miles) increase by 0.4 % the equivalent to £65.
Head of Valuations at Cap HPI, Derren Martin, noted the buoyant market but cautioned that the increases were not sustainable. “We hear very little negativity from retailers across the UK. ‘The positivity is clear, strong sales numbers and healthy margins are seeing retailers post incredibly good short-term results. Prices are higher than they were a year ago and have been steadily increasing for some time. That dynamic is not sustainable in the long-term.”
Although there are no signs of a dip, “There could well be some seasonal downward movements” which would be normal for the time of year. Martin identifies the following reasons behind the current purchasing surge:
- To avoid public transport.
- To downsize in order to save money.
- To upgrade using savings made over the lockdown.
- Their finance agreement is ending.
- They simply want a change.
This is reflected by the fact that SUVs were the most popular vehicle type in September, increasing in value the most by £150 on average as families prevented from holidaying seek greater freedom. Uplifts in city car values remain the largest since Lockdown which may be due to commuters avoiding trains and buses.
Historical Cap HPI data shows that higher prices in September is a normal annual trend. Increased supply usually takes the heat out of used car prices as stock begins to hit the market from October onwards following part exchanges retailed during the previous month’s new number plate surge.
However, Martin anticipates that 2020 will see more of these cars being sold directly by franchise dealers than normal. Therefore, auction stocks will be, “Lower than is the norm for the time of year, helping to keep used values stronger than they may usually be at the start of the final quarter of the year.”
Although the prices might not be sustainable, given the turmoil and challenges of 2020 used car dealers will be forgiven for enjoying the peak in demand whilst it lasts. Hopefully sourcing the required vehicles isn’t proving too big an obstacle.
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