Car rental agency

There are ‘no crashes’ in the used car business, says Cap HPI’s Derren Martin

Despite signs that the UK’s cost of living crisis is beginning to impact the value of older vehicles, there are no signs of a ‘fall’ in prices in the used car sector , Cap HPI’s director of valuations told AM.

In the latest in a series of mid-month updates from Derren Martin, AM learned that a “stable” market has seen the value of used cars at three years and 60,000 miles drop by an average of 0 .1% since the beginning of the month in July, with a decline of 1.3% at 10 years.

But as demand continues to outstrip supply, cars just one year old saw a 0.3% increase.

Martin believes supply issues, which he recently described as preventing a “bloodbath” of falling prices in the sector, will persist for some time to come.

“There might be some change in the market in September, but the problems are going to be with us for a while,” he said. “Right now the market is stable. There is no price crash right now or on the horizon.

Nervous trade

There are, however, signs of nervousness among consumers and automotive retailers.

Martin said older, cheaper cars were on the decline as less affluent customers felt the impact of the rising cost of living, while retailers shunned vehicles that require a lot of prep or repair work. .

“There are signs that the economic situation is having and is having an impact,” he told AM.

“Retailers seem to be moving towards newer, more premium cars that are retail ready and I think that’s focused on the nervousness of having a vehicle in stock – when it needs prep or repairs – at a time when they fear the market is starting to decline.”

Earlier this week, AM reported findings from Close Brothers Motor Finance that the cost of cars is the top priority for car buyers as the cost of living crisis begins to bite.

But, according to Auto Trader, the average retail price of a used car has now risen for the 27th consecutive month, reaching £17,252 in June, up 41.5% from June 2019.

Martin said more expensive vehicles continue to perform well for retailers. He said: “Retailers operating in the most premium segment of the market, however, continue to do very well. If you can get hold of good quality cars, or the few newer models that exist, prices and margins remain high.

Impact of the offer

Recent Auto Trader data on the industry’s most depreciated and popular used cars showed the impact that resurgence in supply can have on prices, with an influx of a certain model causing a drop in second-hand prices.

Martin recognized this trend and observed that a surge in deliveries of new Minis towards the end of last year saw used prices fall as parts exchanges reported re-entering the market.

But he added: “It’s a trend, but it’s only really apparent where customers are loyal and come back to replace like-for-like.”

Martin suggested rental companies were starting to put pressure on the used-car sector as OEMs continued to struggle to produce enough vehicles amid shortages of semiconductors and other components.

Those who previously bought new cars wholesale are now turning to remarketing suppliers and auto retailers to tap into the near-new market wherever possible, he said.

“These companies used to make money from remarketing and now they have to compete with others to source cars in a shortage market and make sure they make their profits from leasing,” he said. he declares.

“It used to be that you could rent a car for less than you could rent a washing machine, but that’s certainly not the case now.”