Data firm Cox Automotive have spoken out about a possible new normal for used car prices after the pandemic, one where we might never see used car prices drop to the levels they were before Covid emerged.
The insight and strategy director for Cox Automotive Philip Nothard said, ‘We expect current market conditions to continue throughout Q1 2022, and it’s entirely possible that we are seeing a revised benchmark’ for used vehicle prices.
Why is there a new benchmark for used car prices?
Unsurprisingly, the ‘new normal’ for used car prices is down to the effects of the pandemic, which is still ongoing. A series of lockdowns, the first of which started in March 2020, pushed a lot of UK dealerships online. While stay-at-home rules and social distancing meant a lot of businesses had to close shop, so websites and online processes have started to dominate our shopping habits more than they ever have.
According to Cox Automotive, the pandemic has ‘rapidly accelerated the online and digital marketplace compared with two years ago’, which could mean we see higher prices stick with us for the foreseeable future. This could be great news for those managing used car dealerships, especially considering the tough times dealerships had to experience during the three UK lockdowns.
Stock troubles set to continue
However, it’s not all good news. Although there was a great boom in used car prices this year which saw prices rise to 28.6% higher in November compared to last year, it’s becoming more difficult for used car dealers to replenish their stock. This is a knock-on effect of the semiconductor shortage, which we’ve talked about before. The chip shortage has meant the motor industry has ‘lost 1.4 million vehicles which will never reach the used car parc,’ leading more drivers to buy used or nearly-new cars.
This has been great for raising used car prices – something which is set to continue into 2022 – but the problem is there isn’t enough supply to meet demand. Likewise, most of the stock coming in is being dominated by used car giants with more buying power than smaller dealerships. On top of this, there’s no huge ‘tsunami of stock’ on the horizon to help manage supply issues, so smaller car dealers will need to keep a keen eye out for vehicles that do become available to help stock flowing.
Philip said, ‘It’s important to remember in the final month of the year that this is traditionally a slow period, as retail activity slows ahead of Christmas. Prices are expected to drop in line with usual market cycles, so current prices still reflect a high demand with a low supply market. With prices as they are, dealers are becoming increasingly cautious, but as the year draws to a close, they will require stock for the new year, so prices are unlikely to drop significantly.’
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