June saw a two-tier market for used car values with older, cheaper car prices increasing in general, but under two-year-old car prices dropping on average, Cap HPI says.
Three-year-old, 60,000-mile cars saw an overall increase of 0.3%, which marked the first average upward movement in June since 2009. However, values for younger vehicles dropped by 0.4%, but started to improve mid-June as dealers became active once more. Cap HPI cited the example of the Volkswagen up!, which – contrary to its name – went down 1% at the start of the month but then recovered by 3% towards the end of the month. Forecasts had predicted that smaller models and older premium cars would be in high demand.
Cap HPI pointed out that cars aged five-years old or over were the real success story of June, with average movement increasing 1.2%, or £70. 10-year old cars have increased by an unprecedented average of 5.7%, or £140, at a time of the year when traditionally values invariably drop.
Derren Martin, head of valuations UK at Cap HPI, said: “The strength of the used car market through June has taken even the most optimistic within the industry by surprise. The question ‘how long does this carry on for?’ is one being asked far and wide at the moment, and there is no historical precedent to reference.
“Our Live valuation service will continue to track the market daily, and any fluctuations over the coming weeks will be reported real-time. As has happened in June, values for specific models can change in different directions over days or weeks, so keeping a close eye on daily valuations is essential at this time.”
Within these averages, there have been some particular winners. The Peugeot 107 at both five and 10-years old has increased by a significant 10%, the BMW 3-Series Diesel and Audi A5 Coupé increased by a similar percentage on older vehicles, averaging around £350-400 at the 10-year point. The BMW X3, pre-2010 model, has increased by almost 12% or £355 on average, Cap HPI added. For the percentage increases to occur in such a short-time period is almost unprecedented.
Due to the warmer than average weather, convertibles and cabriolets have been more sought after too, particularly for models over three-years-old. Prices have not only been helped by the sunny disposition, but also of people’s disposable income with the country’s workforces largely furloughed.
Cap HPI cautions, however, that demand hasn’t been the only instrumental factor in its findings, with a supply shortage also making a mark – the lack of new car activity led to a shortfall in the numbers of part-exchanges being generated.
Logistics issues have also become a significant problem for the industry, with delivery lead times going from around 72-hours in early March to approximately 15-days in June, according to anecdotal feedback.
Martin concluded: “Generally, the adage ‘what goes up must come down’ rings true with used car prices and is proven by movements in Cap HPI used values over the years. Once the current pent-up demand is exhausted and the supply chain gets back up to closer to full capacity, the market is likely to see volumes appear from lease and other finance extensions. While this may not happen in July, it seems almost inevitable that the current strength is unsustainable and supply will at some point outweigh demand, maybe towards the end of the summer.”