September and the fourth quarter of 2020 will be a critical period for the UK used car market as the threat of a second lockdown looms, according to Cox Automotive.

The latest industry data revealed that new car registrations were higher in the first half of September compared with the same period in 2019, with healthy order banks for most OEMs across franchise dealer networks.

Philip Nothard, customer insight and strategy director at Cox Automotive, said: “Although new car registrations are way down year-to-date in 2020, we are starting to see demand increasing to more positive levels. New vehicle supply remains a concern as OEMs ramp up production again to meet demand following their constraints due to the impact of the Covid-19.

“OEMs are also keeping a close eye on Brexit developments and the possibility of tariffs being introduced. The lack of clarity on Brexit and the import prices on new cars to the UK is undoubtedly creating concerns for car dealers, increasing the uncertainty already caused by the pandemic. Fleets are also holding back on orders due to economic conditions which is impacting new car registrations.”

In the used wholesale market, demand shows signs of levelling off with retailers being more selective as the initial pent-up demand seen in between June and August slows down.

Nothard added: “Used car values remain strong, with just a slight fall after the abnormal rise in values witnessed during August. Used car prices remain healthy following a rise of 3.9 indexed points, as supply aligns with demand. We saw that supply returned to mid-July volumes in August, which is an increase of 18.2 indexed points from the post-lockdown low. However, we expect to see supply volumes rising faster, especially given the significance of the September market to dealers.

“Furthermore, reduced demand for poor conditioned used vehicles continues to weaken values within the wholesale arena, and we are expecting the prices of 10-year+ cars to reduce.

“It is also encouraging to see the response within the trade to our online auctions at Manheim, which continue to offer customers buying efficiencies and multi-sale opportunities. September and Q4 will be a critical period for the used car market. The threat of new regional lockdowns by the UK Government will cause more concern within the industry. However, with all the new Covid-secure procedures now in place, we are hopeful that the industry can remain open for business. I am expecting many dealers to remain cautious in Q4 though.”

The latest Cox Automotive sentiment survey found that motor dealers remain optimistic that demand will continue to be strong in the used car market.

Nothard said: “As usual, three to five-year-old stock remains a premium and generally more difficult to source. It is good to see that optimism remains in the industry, and that demand within the used market will continue. We do also expect to see a seasonal flow through to the end of the year.