The sudden rise in used car values, driven largely by the billions of free furlough cash and Covid loans dished out by the UK govt, has peaked it seems. After an 80% rise in the cost of diesel and petrol, car buyers are now not so keen to change vehicles. Add in some doom n gloom from Martin`I’m Shouting So You Understand’ Lewis on energy bills this winter and you have a reluctant market. It’s basically gone from splash-the-cash leisure purchase to distress purchase in under 6 months. Ouch.
For insurers it could be good news, as older cars can be written off for less money, plus the job of repairing newer cars might be easier, depending on the spares supply. You can expect more drivers to skip servicing, MoTs and insurance bills in winter IF the gas and electricity companies send out bills of over £300 per month. That means, more claims and admin time sorting out incidents involving uninsured consumers on the roads.
Rocky road ahead then.
Ian Plummer, Auto Trader’s Commercial Director commented;
“Given the growing squeeze on consumer finances it’d be tempting to attribute Q2’s weakening used car sales on crumbling levels of demand, but in reality, the market is reeling from a blow in basic economics – there’s simply not enough cars to sell. In fact, due to the double whammy of forecourt closures and a shortage of micro-chips, nearly 2 million new cars were ‘lost’ over the course of the pandemic, resulting in a significant shortfall of younger cars re-entering the market for sale.
“The drop in sales is also heavily skewed by last year’s massive post-lockdown surge in demand that saw the market leap 12% on Q2 2019.
“Despite the economic uncertainty around the rising cost of living, surging fuel prices, and the latest hike in interest rates, for now, our data offers a stable outlook for the used car market. In fact, the lack of availability combined with jam-packed new car order books – and very long waiting times – is keeping used car demand levels buoyant; the current volume of advert views on our marketplace dipped -5.7% on last year’s record levels, but against the more ‘normal’ trading conditions of 2019, they’re up 12.4%. What’s more, our latest consumer research found that four out of five consumers visiting Auto Trader are at least as confident as they were last year in their ability to afford their next car.
“Although the rate of growth has softened in recent months, used car prices remain exceptionally strong, with average prices increasing over 40% in just three years. They’ve also increased month-on-month, which contrasts with typical seasonal trends. Anyone predicting an imminent crash in retail prices will be sorely disappointed.
“Reflecting the huge surge in sales, the increasing pinch at the pumps has caused demand for electric cars to rocket on our marketplace, up a whopping 51% on Q2 last year, as motorists look for more efficient alternatives to traditionally fuelled cars. This is well ahead of the levels of used EV supply which only increased 16%, and well ahead of demand seen elsewhere in the market.”
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