The current boom in used car prices is likely to continue into the third quarter of 2021, according to the Vehicle Remarketing Association (VRA).
Chair of the VRA, Philip Nothard, said that the view of both vehicle valuations experts and dealers indicated that there remained headroom for further rises on top of almost double-digit percentage increases in recent months.
“We recently held a webinar with experts from AutoTrader, cap hpi and Cazana, and the general consensus was that the used car sector has never seen anything like the current conditions. We are in a kind of ‘perfect storm’ where stock is in very short supply, demand is high, and buyers are ready to spend freely.
“This is having all kinds of effects across the market,” continued Nothard. “It is not simply that prices are rising but that stock turnaround is very fast and there are also signs that dealers are finding that they can increase margins.
“In fact, there is a general view that dealers could be even ‘braver’ when it comes to higher pricing, and this is something that we expect to see happening into Q3.”
The type of stock dealers would normally retail is also changing, according to the VRA, with the likes of franchise dealers switching more of their activity to the used market.
“However, many dealers are having so much trouble getting hold of stock that they are retailing almost everything they take in part exchange. Those who specialise in 2-6-year-old stock, for example, might be happy to now sell a 10-year-old car.”
Despite the price boom, Nothard said the winners in the situation will be the dealers who are managing to maintain a strong supply of cars. This is due to the ongoing stock shortages, which has meant sales volumes have remained lower.
Nothard added that there was also recognition within the organisation that the current situation could not continue.
“At some point, we will see a levelling off of values as supply increases and demand normalises, although it does not appear to be imminent. The question is whether we will see a noticeable readjustment in values or something more subtle at that point.
“The danger is, of course, that dealers could be left holding stock that is falling rapidly in value but, so far, there is simply no sign of that occurring.”