With a lack of new car sales, it would appear that the used car market is set to soar and the although the first quarter has seen a decline this is directly impacted by the Auctions having to close as a result of Covid-19.
Even when the dealers are re-opened, they will have limited stock to sell and while Europe starts to increase production of new cars this will take time to land at the dealers in the form of new stock.
There is another focus on used cars and the drive for families to start using multiple cars to commute as never before as public transport may be a viable option to travel, there is a lack of confidence in using public transport and with the government advice to use your own mode of transport the used car market will remain buoyant.
How does this impact repair volumes?
1. Residual values will rise as the demand outstrips supply and with increased residual values comes an increased potential for the threshold to repair rather than total loss a vehicle will increase.
2. With more vehicles being used as a result of public transport being the least attractive mode of transport there will be more vehicles on the road and a reluctance to travel abroad will also see more traffic on the roads this summer and autumn resulting in the potential for an increase in accidents.
head of forecast UK at CAP HPI said that the used car market had already gotten off to a good start: “We saw the strongest February since 2012, which saw overall used car values to increase by 1.1%. A result that was significantly higher than the five-year average for February of 0.2%.”
However, currently there is very little data to go on to be able to work out the values. Of course, this will change as the lockdown changes and the auction houses re open.
The knock on effect to the supply and demand will be Leasing & hire companies that are sitting on vehicles that are awaiting collection to be taken to auction houses and this will give an initial influx of vehicles and this may give a false low as there may be a temporary saturation of vehicles but to compensate for this there should also be a vacuum effect with dealers needing stock to sell and traders likewise.
Things to look out for –
- Do not assume that what was potentially a total loss pre Covid-19 will be valued the same way
- Customers may be more reluctant to accept a vehicle as being a total loss as there will be more of a challenge attempting to replace said total loss.
- No longer is it just the inconvenience of finding a replacement vehicle it is also the risk of trolling through prospective buyers and forecourts with the Covid-19 still very much at large.
The NBRA will continue to monitor the industry regarding the used car values and its direct impact on repair volumes and keep you updated as this plays out.
NBRA National Manager