New market analysis published today by trade valuation experts Cap HPI suggests that used car values could fall by as much as 10% from early 2021 as the market readjusts to the effects of increasing unemployment.
The organisation, which closely monitors the used market, and which supplies car valuations to much of the trade says that it’s not all bad news, though.
If you’re selling an excellent condition or low mileage car – which is known as a ‘cap clean’ car, demand from buyers is strong as supply of the best examples is more limited than usual. Cap HPI says that 90% of used valuations are for ‘Cap clean’, which is a 6% drop over the normal levels.
Discounts are coming, but not yet
Car dealers are reluctant to discount yet more mainstream models, though, and reports that sticker prices remain fairly static and are holding firm in the short term, despite worries over the economy. This is going to happen as used valuations are down 2.8% on average for November – the good news is that if you sell a luxury vehicle, valuations are resisting this fall.
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Another area weathering the storm well are small, city cars. They are down overall, but are up 10% on used values compared to the same period in 2019. And surprisingly, given the tax advantages and how in vogue they are in new cars sales, plug-in hybrid valuations are down, with Cap HPI saying that used car buyers are still not keen on paying the extra premiums.
The overall picture is negative for sellers – and look set to become more negative into 2021. Valuations have been generally down by 5% during September and October, and Cap HPI says that this trend has nothing to do with lockdown. Prices were generally inflated in the summer and this is an expected re-alignment.
What this means for you
The used car market isn’t in turmoil, and won’t be any time soon. But there is a downward trend in prices coming up. Dealers are trying to stock up on good used cars, but are holding some stock back from the forecourt in the hope of getting higher profits out of them during the Christmas and New Year period.
Cap HPI’s overall prediction is that used car valuations will deflate heavily after New Year 2021 by about 10% then followed by a minor recovery into 2022. Interestingly, it’s also predicting that demand will outstrip supplies of late-model and approved-used cars into 2021.
Keith Adams, editor of Parkers.co.uk said: ‘with an organisation of Cap HPI’s stature saying this, it’s looking like a good guide to form. If used car values are set to drop in early 2021, the advice is simple – if you’re buying a used car, it pays to hold on and wait.
‘However, if you’re selling, especially if it’s low-mileage or in excellent condition, now’s the time to do it to get the best price.’
