Latest Live Valuations from cap hpi Reveal Seismic Shift Upwards
Unprecedented Used Car Prices See Overall Increase of 6.7%
May 27, 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 used car prices are undergoing a seismic shift upwards. cap hpi’s Live values reported an overall increase of 6.7% at the 3-year point during May, equivalent to over £800 per car. This increase is more than three-times the previous monthly increase in values. The company attributes this rise to strong consumer demand and dwindling supplies.
“We really are in unprecedented times,” said Derren Martin, Head of Valuations at cap hpi. “From franchise dealers to car supermarkets and independents, activity levels across the board have been amazingly strong, with sales rates ahead of budget and in most cases ahead of pre-COVID rates.”
With social distancing still in place and limited capacity some showrooms are seeing queues out the door and sites almost too busy to service all the customers coming in. With a degree of pent-up demand following lockdown 3 restrictions, “accidental savers” with money to spend, new car supply issues, and uncertainty over foreign holidays this summer, consumer demand for used cars has remained remarkably strong.
The current extraordinary rises in car prices which have manifested in the trade arena, have not done so to the same degree in retail, making it increasingly difficult for the trade to buy cars working back from retail advertised prices. With many outlets continuing to sell cars purchased a few weeks ago, not all have been increasing advertised prices of cars in-line with the increased demand they were experiencing. It took some time for many to push prices up and realise that it would be impossible to replace sold units for amounts similar to what they had paid for them.
Remarketers of used cars have increased their prices extraordinarily, but are still selling their inventory. Many have been prepared to sell lower volumes in the expectation that buyers may baulk at prices initially, but they will be back. Some wholesalers are selling cars at well in excess of 110% of monthly cap values and some manufacturers selling their cars close to 120%. According to cap hpi data, many have been increasing prices on a daily basis.
This helped to make auction cars look attractively priced, even though with increased competition they were also selling for way ahead of monthly cap figures.
Every sector has seen values increase in May. Some volume examples are Ford Fiesta up 8.5%, (over £1,000 at the 1-year age point), Audi A3 up over 7% (£1,300 at 1-year old, £800 at 3-years), Vauxhall Zafira up 10.4% (c.£750 at 3-years), Mazda 6 up 8.1% (c.£700 at 3-years), BMW X3 up 6.2% at 3-years old (c.1,500) and Volkswagen Tiguan Petrol up 10% or £2,400 at the 1-year point.
Martin concluded that whilst demand will likely dip from the current peaks, supply levels are still going to be lower than normal.
“There is no tsunami of stock waiting to appear,” said Martin. “There are well documented new car supply issues, meaning less part-exchanges and fleet returns due to component shortages, particularly for semiconductors.
“Currently manufacturers and dealers are switching some customers into cars they have in stock, but what happens when those stocks dry up? Undoubtedly, many lease terms continue to be extended too. From late June/July, stock levels will have dwindled and the component shortage could well be impacting supply more acutely, dependent on the brand. The semiconductor issue could well have an even greater sting in the tail.”
Whilst current increases in value are extremely unlikely to continue at the current rate, prices are likely to stay high without huge volumes appearing in the market. We could well be in for a strong summer for used car prices and this strength could potentially last even longer.
With the market moving so quickly, cap hpi’s traditional monthly values were out of date almost as soon as they were published, and the business has seen strong adoption of its live values to keep in touch with the rapidly evolving market.
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