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Used Car values undergoing seasonal realignment

18 November, 2020: Used car values continue to drop during “Lockdown 2”, but it is part of a seasonal readjustment following a bumper few months for dealers and not a direct result of the second Lockdown itself. This is according to the latest analysis of trade-to-trade sales data by valuation experts cap hpi.

After months of price increases or at the very least, stability, October and November have, so far, seen wholesale values dropping within its live valuation service. The leading valuation provider has identified a decline in trade prices by 2.1% in October and by over 2% so far in November. This equates to around £450 in total on a typical 3-year old car. However, cap hpi confirms that these values were already declining before the latest lockdown.

What is noticeable is that whilst trade values are seeing a decline, retail values remain relatively steady for the moment. Whilst retailers have generally held their nerve over recent weeks, adjusting advertised values only by small amounts when necessary, this has not been the case in the wholesale, or trade market.

Derren Martin, Head of Valuations at cap hpi commented on the reasons behind the fall: “With pent-up demand from the first UK lockdown and consumers buying to avoid public transport both now declining, trade buyers are wary of paying previous high prices for cars that may now sit on their forecourts for longer and will potentially need to be reduced. This has led to a decline in trade prices across the board.

“It is important to remember that, when comparing the same type of car at the same age and mileage point today to a year ago, prices are some 5% ahead of where they were, when normally we expect a decline, as models deflate in price whilst moving through their lifecycle. This upward movement that the market has experienced is not unprecedented, but history shows us that it is generally unsustainable.”

cap hpi reassures that whilst volumes of cars being sold in the trade are lower than prior to the latest lockdown, they are currently only down by around 15%. However, dealers need to be on the guard; with a drop in trade prices now, this could eventually filter through to retail prices.

Martin continued: “Invariably trade prices adjust earlier than retail ones, so it is essential to track what to pay in the wholesale market. With many smaller models of cars around 10% higher in value than they were a year ago, some realignment was always likely and the final quarter of the year is generally the time when values drop. We see no cause for alarm, and many consumers are still buying used cars through Click & Collect. Even with this realignment, used car prices are still higher than even the most optimistic would have predicted a year and certainly six months ago. It is essential for buyers and sellers alike to track trade prices in real-time at times like this.”

cap hpi continues to review and provide further analysis on what the next few weeks will bring to values as the country heads into the Christmas period.

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