Latest data by cap hpi proves no doom and gloom for February car values despite continued falls
Live valuations data from cap hpi reveal a 5th consecutive monthly drop in values overall, but it’s of no cause for concern
February 26, 2021, LONDON – cap hpi, part of Solera Holdings, Inc., a global leader in risk and asset management data and software solutions for the insurance and automotive industries, confirms that, despite a 5th consecutive monthly drop for car values, the industry is coping well with “Lockdown 3”.
cap hpi’s Live values reported an overall drop of 1.5% at the 3-year point during February. This drop is equivalent to an average of £150 per car. Since October, used car trade values have dropped by 9.4%, or almost £950.
Head of Valuations at cap hpi, Derren Martin commented: “It would be easy to look at this headline figure and suggest that the used car market is struggling, but that is definitely not the case. The average drops of almost 10% were preceded by a period of 6-months where average prices increased – we believed a realignment was always likely. Add to that the fact that for the last two months, and in November, the country has been in lockdown, with physical car showrooms closed, it is unsurprising that there has been some pressure on prices due to a forced drop off in demand.”
February continued the “Lockdown 3” theme of retailer’s sales rates generally being somewhere between 50-75% of this time last year, the average being 65%. Bearing in mind where sales rates were during the first lockdown, almost a year ago, it is a positive reflection on the work the industry has conducted to develop its digital footprint, encouraging customers to buy online in such numbers.
The big question is, now we have a Government roadmap to emerge from the current restrictions, what happens next to demand and used car prices?
Martin argues that with the 12th April the target date for non-essential retail to physically reopen, there is increased positivity in the air.
“Our analysis shows that with average retail sales rates being at around 65% of this time last year, the remaining 35% of consumers will be looking to buy once showrooms reopen in April. Add to this those members of the public that are naturally in the market at this point anyway and we are likely to see a period of strong demand. We expect to see this push prices up for a short period of time.”
cap hpi expects this period of pent-up consumer demand will be met, and slightly preceded by, a strengthening of trade values, as retailers become more active with re-stocking their forecourts, particularly as there will be fewer part-exchanges, at least in the short-term, to satisfy retail demand due to a quieter March for new car sales than normal.
Last year, cap hpi correctly predicted a realignment of values would take place in the final quarter and now forecasts a short-term halt to the decline, following the latest Government roadmap to slowly release the UK from the current restrictions. There is likely to be a return to pressure on prices, however, as we move further through 2021, due to a degree of economic hardship and increased used car supply.
The next few months are likely to be particularly volatile for used car prices. The UK remains in unprecedented times and there are, no doubt some choppy waters ahead for the economy. The importance of cap hpi Live valuations, to maximise profitability, based on sold data as evidence cannot be over-emphasised during these potentially difficult and unusual times.
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