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As we close February, our team of experts reflected on the second full month of Lockdown 3 and the expected performance in the market following the latest Government announcement regards the roadmap to lift restrictions.

Last year’s new car registrations ended at 1.63 million units, which is almost 30% down on last year. Consumer confidence clearly plays a part in this, and whilst most businesses have invested in click-and-collect it’s clear that this isn’t a substitute for showroom visiting for some consumers who are in the market for a new car.

With Monday’s announcement that “non-essential retail” will remain closed until early-April suggest that this underperformance is going to continue into next quarter.

Fleet sales are also down, again suggesting that confidence is lacking for some businesses, redundancies may be taking their toll and key players in the fleet sector like Rental Companies are holding back purchases due to lack of demand.

ICE vehicles continue to decline in share: diesel down 4% and petrol down 6% (this includes mild hybrids). Hybrids too are declining, down from 9,000 units to 7,000, but PHEV and BEV volumes are both continuing to grow, with plug-in vehicles now accounting for 14% of new registrations.

In the used car market, the full month of January, when we entered lockdown 3, ended up 45% down on the same month of 2020, so 55% of what we would class as a normal trade sales rates, but February has definitely seen an increase in buying activity.

With Lockdown 3 entering its second month, for most retailers, February followed a similar, but slightly improved, pattern to that of January. Enquiry rates and sales were reduced from where they would be in more normal times but, for many at least, ahead of where they predicted as we entered lockdown on 4th January, and certainly ahead of where they were in Lockdown 1.

It would be easy to be downbeat about the year-on-year reduction, in what is traditionally one of the most active and fruitful periods of the year for used cars. However, there were always going to be consumers put off by not being able to visit a showroom.

Most retailers have held their nerve on advertised and transactional retail prices and as a result margins have increased. Whilst the temptation has been to use “days-in-stock” metrics and reduce in the traditional way, most have held their nerve and only reduced prices selectively. Some MPVs in particular have been adjusted downwards as their popularity continues to wane. It is clear more than ever that as well as holding advertised prices, retailers are also less inclined to negotiate on transactional price than they have been in the past.

The majority of wholesale buying in February has been selective – stock in ready-to-retail, cap clean condition has sold, particularly if it was something that set it apart from the norm. Older, particularly premium stock in good condition has been sought after.

In January, Live values dropped on average by 1.4% at the 3-year point & February has been similar, as we predicted. With lockdown still in place, we were not expecting a traditional lift in the month.

Over the months since June 2020 there has been a marked decline in values of hybrids and electric vehicles compared to petrol and diesel values. This does appear to have stabilised for now, however, with values of all fuel-types dropping by similar average amounts during February. This may well be a temporary respite for these alternatively-fuelled vehicles however, as many still look expensive compared to traditional internal combustion engine equivalent cars. There remains little incentive for the used car buyer and supply levels are only going to increase – demand needs to keep pace or values will drop.

Historically, used car values in March can go in either direction, although one consistent picture is that they do not tend to move too much either way. Last year was the exception. This year, demand in the new car market will remain relatively subdued as we remain in lockdown and head through March, as the industry remains online only. There are also supply issues around vehicle parts, particularly semi-conductors, that may well delay new vehicle registrations even when restrictions are lifted. Volumes in the used market are unlikely to increase in the short-term, therefore.

We are expecting an increase in consumer demand for both new and used cars when lockdown is eased. It is fair to assume that if sales rates have been at c.65% in the used market, then the c.35% who have not purchased will be likely to do so over the weeks and months following Lockdown being lifted.

In the LCV market, performance across the board was running at 104% of CAP average. What we have witnessed from October last year, is that the demand is still there, but the prices that the trade want to pay are not at the same heights as we saw earlier in the year.

We may, in fact be seeing a ceiling on what the trade are prepared to pay for used vehicles. Vehicle condition is playing some part in the equation.

Many of the sales that we have viewed in the last couple of months have had a higher number of vehicles that are being declared as a non runner with detailed faults, unlike 2020 when they were few and far between.

Nevertheless, we are still predicting that the market will be strong going into March. Demand is out there for the right vehicle in the right condition.