The fall in the UK of used car sales by 30.7% in March is no surprise. This is broadly in line with the new cars sales reduction of 44.4% in March, and we can expect a further drop off in April given lockdown during the whole of the month.
Based on a recent update from cap hpi, although auctions are currently closed, there continues to be limited sales of used cars. April figures suggest around 3,500 cars have been sold in total, versus a normal rate of 7,000 cars per day. The expectation is that cheaper cars will become more desirable in the short-term while the market for expensive used cars may be limited, as people’s discretionary spend is squeezed and confidence wanes. Used cars are also more resilient due to downtrading from new and younger used cars.
Impact on pricing
Used car prices in the UK remained stable during March, but if we look to other markets for cues, Manheim have reported wholesale used vehicle prices in the US decreased 11.41% month-over-month in April. This fall in sales will have a negative impact on dealers and finance providers as residual values are impacted. Despite different market dynamics, this is a further risk to manage as UK businesses restart.
Rise of online for used cars
Businesses are still operating in limited conditions, but auction houses are now offering used cars in online channels with strict safety guidelines to manage customer delivery. This is much needed to stimulate the market in preparation for dealers being able to open in the coming weeks.
Impact to personal mobility & fleets
We expect vehicle miles travelled in cars to increase as consumers balance the need to return to work, whilst maintain social distancing and limiting use of public transportation. This will drive demand for vehicle ownership and used cars in the coming months. A further dynamic is that fleets & rental companies are now revising their orders as cars are sitting idle, which pushes the risk back up stream to OEMs.
Reasons for optimism
Despite the challenges, there are green shoots. China has reported April vehicle sales with a year on year increase of 4.4%, largely driven by stimulus support and commercial vehicles that achieved a strong 31.6% growth. On the supply side, production volume in April rose 2.3% to 2.1 million to meet the demand.