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Reprice and sell overage used car stock ‘immediately’, says Indicata

Indicata group sales director Jon Mitchell

Indicata has advised used car retailers to reprice and sell overage stock “immediately” in a bid to get on the front foot ahead of an anticipated easing of COVID-19 trading restrictions in the New Year.

Rising stock levels and the impact of COVID-19 ‘Lockdown 2’ on consumer confidence has brought an end to the trend of rising used car values, according to insight from Indicata, leading to the advice from group sales director Jon Mitchell.

Used car sales in the UK grew by 5.7% in October aided by a 7.4% month-on-month growth in stock levels, according to the latest Indicata market insights report, but slowing demand triggered by a rising coronavirus ‘R’ infection rate and the resulting retail restrictions has stalled sales.

And while Auto Trader issued calls for calm – re-stating its call for retailers to “hold firm” on any price cuts during the new lockdown – it has advised an immediate dispose of over-age stock in order to be ready for increased sales in January.

Mitchell said: “Any 90-120-day stock should be immediately repriced and sold to tidy up stock portfolios ready for a potential fast start in January.

“The supply shortage has contributed to higher prices at a time when traditionally the used car market is slowing down. As supply improves, we are starting to see that trend reverse with prices softening.

“With Lockdown 2.0 firmly in place for November limiting the market to online sales, and December typically a slow used car month, dealers should be prepared to manage an overstocking issue on the back of reduced demand.

“We would recommend using tools like Indicata to immediately review prices on a daily basis and make decisions on keeping their best stock for Q1 2021 to cater for more consumers buying used cars online.”

Earlier this week the Society of Motor Manufacturers and Traders (SMMT) reported that the UK's used car market had delivered a 4.4% increase in sales as COVID-19 restrictions eased during Q3.

Indicata’s latest sector report said that stock turn was still showing “a high degree of constraint” despite retailers’ rising stock levels.

Its data showed diesel at 8.6 and petrol at 7.9, indicating popularity in the used car market, especially compared to BEVs where despite an 80% increase in year-on-year sales, stock turn is low at 4.9, a 16% fall over October 2019.

Indicata said that a lack of OEM tactical action in the new and pre-registration market could clearly be seen by the 41% drop in sales in October (down 43% compared with September), but added that a 15% increase in stock turn for sub-12-month old cars showed that pent-up demand remained for the limited supply available.

Sales rates and stock turn for the fleet, leasing and PCP market supplied two to three-year-old used cars remained flat, it said, adding: “This could indicate a future challenge as finance companies have been providing customers with contract extensions which will result in increased used supply coming to the market in 2021.”

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