Used Car Prices Aren’t Helping Lease & PCP Rates
Saturday, 25. July 2020
Used car values for models less than two years old have dropped in June while prices for older, cheaper cars have risen, according to Cap HPI.
The average movement of five-year old cars is 1.2%, or £70, up during June, while 10-year old cars have increased by an unprecedented average of 5.7% or £140, at a time of the year when values invariably drop.
The overall price movement at the typical three-year, 60,000-mile fleet replacement point was an increase of 0.3%, the first average upward movement in June since 2009.
Values for younger vehicles dropped by 0.4% in the same period, however, they started to strengthen by June 15 as dealers became more active.
Derren Martin, head of valuations UK at cap hpi, said: “The strength of the used car market through June has taken even the most optimistic within the industry by surprise.
The question ‘how long does this carry on for?’ is one being asked far and wide at the moment, and there is no historical precedent to reference.
“Our Live valuation service will continue to track the market daily, and any fluctuations over the coming weeks will be reported real-time. As has happened in June, values for specific models can change in different directions over days or weeks, so keeping a close eye on daily valuations is essential at this time.”
Convertibles and cabriolets are among those that have been sought after, particularly models more than three-years-old.
While demand has been a significant factor in the average price movements, shortages of supply have also played their part says Cap HPI. The lack of new car activity has led to a shortfall in the numbers of part-exchanges being generated.
Logistics issues have also become a significant problem for the industry, with delivery lead times going from around 72-hours in early March to approximately 15-days in June.
Martin added: “Generally, the adage ‘what goes up must come down’ rings true with used car prices and is proven by movements in cap hpi used values over the years.
Once the current pent-up demand is exhausted and the supply chain gets back up to closer to full capacity, the market is likely to see volumes appear from lease and other finance extensions.
While this may not happen in July, it seems almost inevitable that the current strength is unsustainable and supply will at some point outweigh demand, maybe towards the end of the summer.”
Following the Coronavirus pandemic, fleet operators expect to have fewer cars and lower average mileages as the country faces severe economic decline. As the fleet sector curretly accouns for more than half of new car registrations, the knock on effect for the used market could be significant. By Graham Hill thanks to Fleet News
