Used car prices have risen steadily since the pandemic started all the way back in March. Despite early reports of a lack of demand as millions were locked down at home, many car dealers are now reporting a surge of interest.
Luckily, if you’re over 55 and looking to purchase a second-hand car, you could use your property wealth to do so. Excellent financial products, like equity release, are helping older homeowners access money to purchase necessities in these tough economic times. As such, the equity release industry rapidly grew in 2021, reaching a staggering £4.8bn, and 80% of experts predict further growth for 2022.
The used car market in the UK is a traditional case of “supply versus demand”: there are fewer new cars being sold, and many customers are looking for a cheaper, used car rather than an expensive new one.
Coupled with the rumoured difficulties in obtaining credit, it is not surprising that demand for second-hand vehicles is rocketing. According to James Bidwell of FreeCarCheck.co.uk, many dealers have seen “unprecedented demand not experienced for many years”.
High demand nearly always equates to prices going up and the UK used car market is no exception. Many customers find it hard to believe but, according to Cap HPI, in some cases used car prices have gone up by as much as 12%. In a world where used car asking prices nearly always drop with the passage of time, this is almost unprecedented.
Before lockdown started, the prices of used cars across the UK continued to drop slowly month-on-month. But as soon as lockdown began in March, analysts could see that demand was surging. Quite simply there was not enough stock to fulfil all orders.
Now that volume is returning to the market and car makers such as Honda and Toyota are ramping up production once again, most dealers expert the price rises to peter out soon, and for value to return to the used car market.
Data & Insights Director at Auto Trader, Richard Walker, believes that used car prices will “fall gradually from now on”. However he is clear that it’s extremely unlikely that there will be a cliff-edge plunge:
With the government’s furlough scheme ending in October, coupled with weakened consumer confidence and unemployment rumoured to hit 4 million, it’s unlikely that prices will continue to rise.
As people’s financial situations darken, the number of PCP-financed cars on the market is also likely to decrease. Obtaining credit becomes more difficult as jobs are rendered less secure, and there is likely to be a steep increase of worried customers trying to voluntarily terminate their PCP contracts. In other words, “handing back” their rented vehicles, which will increase used volumes further.
Another expert, James Bush of Motorway.co.uk, says: “We don’t expect to see a softening in demand for used cars when furlough ends. It’s the new car market that’s likely to suffer.”
Even with furlough ending many people will still purchase used cars but might look for alternative age and models that are either more economical or cheaper in overall value. It however still remains to be seen if the Government will come up with any further props or schemes to increase volumes.