Price drop fears may end used car values’ ‘unstoppable’ strength

Aston Barclay has reported that the “unstoppable” strength of the used car market might be about to soften after increased post-September supplies start to reach remarketing centres.

Reporting a fall in dealer prices during Q3, alongside a softening of all used car values in the first two weeks of October, the independent remarketing specialist believes the sector may be seeing the first signs that Q4 will see the market returning back to “some normality” with prices and demand stabilising and supply continuing to gradually rise.

Managing director, Martin Potter, said: “The market for used cars between 12 and 60 months old was unstoppable in Q3 which is why late and low and fleet prices were so high, but we have witnessed a change in buyer attitudes in early October.

“Many buyers have started to only buy the stock they need for fear of market prices moving downwards and them being left with a number of cars owing them money.”

In its latest Insights used market report, Aston Barclay reported that late and low (12-to-24-month-old) and fleet used prices rose by 7.3% and 6.5% in Q3 to £16,383 and £11,653.

A severe shortage of stock fuelled the quarterly £1,122 rise for late and low cars while an all-time low average of 39,000 miles, it said, with high dealer demand for cars in the £8-12,000 price band contributing to fleet prices rising by £715 during the quarter.

Meanwhile, dealer part exchanges beyond 60 months of age sold saw values fall across all sectors in Q3 by an average of 8.8%, after what it described as “the extraordinary” rises, of up to 20%, experienced as the market emerged from COVID-19 lockdown in Q2.

The report added: “Supply improved dramatically in the old and budget part exchange sectors, while supply of younger part exchanges at between 55-to-78 months old reduced as dealers chose to hold onto their stock to retail rather than send them to auction.”

Aston Barclay warned that a number of unknowns could define the used car market in Q4.

The end of Government Coronavirus Job Retention Scheme (CJRS), repossessions and voluntary terminations flooding into the market and ultimately the impact of Brexit are all likely to impact consumer and dealer confidence, it said.

Potter added: “Any one of these could affect dealer and consumer confidence. However, we feel prices will remain healthy into 2021 as new car lead times keep extending.

“This means a flood of used cars hitting the market will be avoided as ex-business and personal leasing contracts are extended due to new car delays.”