Expect Price Pressure in May but Market Remains Strong

Used car stocks may suffer downward price pressure throughout May but trade analysts say the market is strong and dismiss forecasters who talk of a return to the recession conditions of a decade ago as scaremongers.

Last month did see the biggest accumulated monthly drop – 2.3% for cars at the 36 month/60,000 mile point – since December 2015 and the biggest fall in any April since 2011. Cap hpi said city cars and superminis were badly hit, dropping 2.8% and 3.1% respectively; SUVs were in line with the market performance as a whole, losing an average of 2.2% or nearly £300.

Among the other Q1 movers, lower-medium diesels fell out of favour with buyers and saw an average drop of 3.3% – £300 – while petrol variants came down by 2.6%. Hybrids, where lower supply more accurately matches demand, lost 1.3%, or £150.

Derren Martin, head of UK valuations at cap hpi said: “After 18-months of market strength, the perfect storm hit during April. Used values were already high, with little or no appetite by retailers to either push prices to the consumer up or squeeze their margins further, while supply increased from part- exchanges and fleet returns generated by the -19 plate. Buyers that were active took advantage of the situation, offering below previous cap values for the vast majority of cars.”

Access to finance not an issue

But he added: “There has been some scaremongering in the used market surrounding these value drops, with some even comparing to what happened during the recession of 2008 but there is no comparison. There is no suggestion that large price drops are a likely theme from now on. In 2008, access to finance was a key driver – that is not an issue in 2019.”

Looking ahead, Derren said there will be the usual short- term pressure on prices expected this month, saying: “There will undoubtedly be the natural impact of high stock levels for some time to come, off the back of increased supply and lower sales rates in the last few weeks.

“This will likely have an impact on values as we move through May, particularly as demand will be affected by the two Bank Holidays and school half-term. The average movements of all fuel-types in Live valuations during May, over the last five- years, has been a drop of 1.6%.”

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