June delivered its first rise in used car values since 2009 in a two-tier post-lockdown market defined by increased demand for older, cheaper vehicles, according to Cap HPI.
According to the vehicle valuations experts, the overall pricing movement at the three-year, 60,000-mile point was an increase of 0.3% during the month.
Cap HPI said that values had “started to strengthen” after England’s car retailers resumed their showroom trading operations on June 1, but not enough to arrest a 0.4% decline in the value of newer used cars.
As predicted by many sector commentators, who suggested that commuters may be inclined to shift into an affordable car rather than return to public transport during the COVID-19 crisis, older vehicles proved to be the real success story in June.
It also suggests that car retailers held firm on pricing during the lockdown period, a strategy urged by the likes of Cap HPI and Auto Trader to help maintain market stability.
Cap HPI’s data showed that the average movement of five-year-old car is a 1.2%, or £70 increase, while 10-year old cars have increased by 5.7% or £140.
Head of valuations, Derren Martin, 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.”
Among the most striking pricing shifts seen during June, Cap HPI noted that of the Peugeot 107 at both five and 10-years-old, which delivered an increase of 10% and the BMW 3-Series diesel and Audi A5 Coupe in the premium sector, each of which increased by a similar percentage on older vehicles, averaging around £350 to 400 at the 10-year point.
The BMW X3, pre-2010 model, meanwhile, increased by almost 12%, or £355, on average.
Cap HPI described such large percentage increases in such a short-time period as “almost unprecedented”.
Older convertibles and cabriolets also proved popular throughout June.
Demand has played a significant factor in the average price movements, according to Cap HPI, with a shortage of supply resulting from a lack of new car activity playing its part.
In a statement issued today (June 26), it added: “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, according to anecdotal feedback.”
In predicting the direction of the used car market’s pricing trends, Martin suggested that the adage “what goes up must come down” generally rung true with used car prices, adding that this was born-out by movements in Cap HPI used values over the years.
He said: “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.”