Cap HPI has said that a realignment of used car price values was “always likely” after it reported a fifth consecutive month of declining vehicle prices across the sector.
While Auto Trader recently claimed that the value of the average vehicle marketed via its online advertising platform had risen for a 41st consecutive week, Cap HPI revealed that its data showed a downward trend, but insisted there was “no cause for concern”.
Cap HPI’s live values reported an overall drop of 1.5% (around £150-per-car) at the three-year point during February, meaning that used car trade values have dropped by 9.4% (almost £950) since October.
But head of valuations, Derren Martin, said that it was “definitely not the case” that the used car market was struggling.
He said: “The average drops of almost 10% were preceded by a period of 6-months where average prices increased – we believed a realignment was always likely.
“Add to that the fact that for the last two months, and in November, the country has been in lockdown, with physical car showrooms closed, it is unsurprising that there has been some pressure on prices due to a forced drop off in demand.”
Cap HPI reported that February had continued the “Lockdown 3” theme of retailer’s sales rates generally being somewhere between 50% to 75% of this time last year, the average being 65%.
And Martin said that there was increased positivity in the sector following Prime Minister Boris Johnson’s announcement that non-essential retail could re-open its doors to customers from April 12.
Last week car retailers and OEMs reflected in interviews with AM that, while disappointed that the reopening could not have come sooner, they were ready to embrace a return to business.
Martin said that Cap HPI’s analysis showed that, with average retail sales rates being at around 65% of this time last year, the remaining 35% of consumers will be looking to buy once showrooms reopen in April.
“Add to this those members of the public that are naturally in the market at this point anyway and we are likely to see a period of strong demand,” he added.
“We expect to see this push prices up for a short period of time.”
Cap HPI said that it expects the post-lockdown period of pent-up consumer to be met, and slightly preceded by, a strengthening of trade values, as retailers become more active with re-stocking their forecourts, particularly as there will be fewer part-exchanges in the short-term.
There is likely to be a return to pressure on prices as the year progresses, however, due to a degree of economic hardship and increased used car supply, it said.