CoronaVirus Will Have A Major Effect On Used Car Prices And Lease Rates
Saturday, 11. April 2020
New analysis from used vehicle pricing specialist Indicata has revealed the potential impact Coronavirus will have on the daily rental and leasing sectors.
In its free-to-download White Paper, Indicata looks at the short, medium, and long-term effects of Covid-19 on the European used car industry, particularly rental and leasing companies.
The research includes analysis of nine million used vehicle advertisements across Europe each day. It highlights that Northern Europe saw a sales fall of 21.5% between March 11 and 18, while southern Europe, including Italy saw sales fall by 44% during the same period.
A clear correlation between infection rates and the fall in used car sales between March 11-18 versus the same period in February, was uncovered.
As the virus progresses, Indicata says re-marketers will need to know the country-by-country market trends to identify the most effective sales channels.
Andy Shields (pictured), global business unit director at Indicata, authored the White Paper. He said: “The relationship between the increase in the number of people with Covid-19 and the measures each individual government introduces to fight the pandemic is already having a detrimental impact on European rental and leasing companies.
“Countries will have different challenges at different times and it’s all about equipping companies with the right data to help assist them in making fast decisions.”
He says that rental companies are likely to have contracted their annual volumes with OEMs already and now need to re-assess current contracts.
“In many cases contracts will be defaulted on, such is the loss of demand in the rental industry,” Sheilds explains.
This will leave OEMs with a stock of unregistered, and in some cases registered ready for delivery, new vehicles the rental industry does not want.
In addition, de-fleets will be happening, and rental companies may try and hold risk vehicles until after the initial social distancing. However, when there is significant volatility on demand and differences between country the capacity to absorb stock at any one time becomes more challenging.
According to Sheilds, the challenge for the leasing industry will be to manage the current volatility in the market while respecting the fact that there may be no short-term recovery in residual values.
In 2008/9, many leasing companies extended vehicle contracts. With the risk used vehicle prices will be depressed for an extended period, an immediate run on vehicles may not be ideal. Even so, vehicles will still need to be remarketed over the downturn.
The White Paper also looks at how the last recession played out for both the new and used car markets across Europe and how those same trends may repeat in a world dominated by Covid-19. By Graham Hill thanks to Fleet News
