When will used car prices drop?

When will used car prices drop?

Author
Discussion

vahe

Original Poster:

263 posts

97 months

Wednesday 15th April 2020
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Or will they? Any ideas? Just wondering.

Chipper

1,314 posts

216 months

Wednesday 15th April 2020
quotequote all
vahe said:
Or will they? Any ideas? Just wondering.
The government cant keep paying the nation to sit at home and IMO I think by end of May they will have to let people start to go back to work but with huge restrictions ( this is just how I'm seeing it) . If they stop the furloughing at that time then we will have major unemployment and I just cant see how they can stop that from happening.

I'm not trying to drive down car prices as I'm stuck with a 992 but I think this is going to be absolutely brutal and the last thing people will want to do is put money into a vehicle, and that goes for even the majority of people who think they want a bargain!.

If money is no issue or you produce hand gel for a living I would think the cracks will really start showing early next month but June/July should show the real panic.

This is just my opinion .

KPB1973

918 posts

98 months

Wednesday 15th April 2020
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If prices do drop, then PX values will do the same (after all, those cars will need to be recycled into the same, lower-value, system).

So the cost to change may remain about the same, or get even worse than current averages.

Cash buyers with no PX may make hay vs buying a few months ago, but if the used car market goes into freefall, then the depreciation of the cars that they buy might not follow the same curve as present.

anonymous-user

53 months

Wednesday 15th April 2020
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If the factories are shut, with no new cars hitting the market perhaps the contraction in supply will partly offset any collapse in demand ?

For standard cars I think values will be more solid as people will still need mobility. Depends on the length of the shutdown I guess.

Koln-RS

3,848 posts

211 months

Wednesday 15th April 2020
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Financial markets react instantly, for other asset classes - such as property and cars - then there is inevitably a time lag, whilst buyers adjust to what the longer term effects will be.

I suspect that the market is at a standstill at the moment, with most stock still priced at ‘pre-lockdown’ levels, so it remains to be seen where it ends up.

Personally, I would not be rushing out to make any premium priced purchases based on the current economic outlook. I remember vividly what happened in 1991.



gizlaroc

17,251 posts

223 months

Wednesday 15th April 2020
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anonymous said:
[redacted]
And I think a lot of people will be wanting to do exactly that, but many won't be able to afford to do it, so prices may stay stagnant.


I think the biggest thing will be the aggressive way car makers go after customers, with zero deposit and super low or 0% finance deals and high residuals. They will try and buy some business with the thought that residuals will be higher in 3 years due to fewer used cars being available, as they are not going to sell anywhere near the figures they have been selling for a year or two, maybe never sell that many more again.



Fezzaman

552 posts

192 months

Thursday 16th April 2020
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anonymous said:
[redacted]
I think KPB1973 enquired about moving up and the dealer basically kicked him in the nuts on the part-ex but his own stock wasn't repriced by a similar %. So right now it seems regardless of no trade activity taking place, the bid/offer spread is widening and any new deals dealers are bidding lower on buying in stock (regardless of pre-lockdown asking prices and freeze in CAP HPI valuations). That spread will tighten as dealers clear stock on hand and the adjustment to a new normal for price levels happens. On the other hand, if there are fewer dealers/traders fighting to buy the same used stock, as some don't survive the economic fallout, their margins may well increase and they can sustain bidding people low for their part-ex.

Of course when you're looking at these kinds of cars, we as end users don't 'need' to upgrade/change cars whereas dealers 'need' to sell for a living. Any tempting new car discounts and finance deals have no impact on enthusiast buyers if the new car itself is of no interest (or not a substitute for an older/used alternative). The 'new car' arguments of latest gadgets, warranty, maintenance, MOT etc aren't as enticing to the enthusiast market as for a car sold as a white goods daily, reliable method of transport for commuting/family duties.

As a hypothetical, say Porsche needed to get back to producing and selling new cars as a matter of business survival and the closest substitute to a manual 718 GTS 4.0 is a 981 GTS - how can Porsche tempt you into buying the new car? What price would you put on the difference between the 2? What is the current differential?

KPB1973

918 posts

98 months

Thursday 16th April 2020
quotequote all
Fezzaman said:
I think KPB1973 enquired about moving up and the dealer basically kicked him in the nuts on the part-ex but his own stock wasn't repriced by a similar %. So right now it seems regardless of no trade activity taking place, the bid/offer spread is widening and any new deals dealers are bidding lower on buying in stock (regardless of pre-lockdown asking prices and freeze in CAP HPI valuations). That spread will tighten as dealers clear stock on hand and the adjustment to a new normal for price levels happens. On the other hand, if there are fewer dealers/traders fighting to buy the same used stock, as some don't survive the economic fallout, their margins may well increase and they can sustain bidding people low for their part-ex.

Of course when you're looking at these kinds of cars, we as end users don't 'need' to upgrade/change cars whereas dealers 'need' to sell for a living. Any tempting new car discounts and finance deals have no impact on enthusiast buyers if the new car itself is of no interest (or not a substitute for an older/used alternative). The 'new car' arguments of latest gadgets, warranty, maintenance, MOT etc aren't as enticing to the enthusiast market as for a car sold as a white goods daily, reliable method of transport for commuting/family duties.

As a hypothetical, say Porsche needed to get back to producing and selling new cars as a matter of business survival and the closest substitute to a manual 718 GTS 4.0 is a 981 GTS - how can Porsche tempt you into buying the new car? What price would you put on the difference between the 2? What is the current differential?
Agree with all this.

Ultimately it will be the law of supply and demand that determines price in the medium term. The used car market is already pretty saturated with over 550k on A/T alone.

I suspect the bottom end of the market will be strong, and new car / franchise dealers have other aspects to their proposition which will appeal (esp low deposit PCP). Those in the middle are more likely to struggle.

What remains to be seen is how much of that 550k has to be liquidated and where it end up....auction houses, shuffled to other dealers, reduced on the forecourt.

In my own instance I confess i've been targeting cars where I had a gut feel that the 'middleweight' dealer might want a bit of cash flow vs preserving their margin, but all three I contacted are holding firm. I was completely unsurprised to be kicked in the knackers on PX, but it was worth a shot to try and nab an early bargain given I have cash available. Nothing ventured...etc.


Deanmg

90 posts

144 months

Thursday 16th April 2020
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In my opinion there will be deals to be had. But anyone with a desirable car will hold on to it until better times. Likewise those on finance could be faced with negative equity and so will hold on.

The deals will come via those forced to sell.




NickUSA

805 posts

166 months

Thursday 16th April 2020
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anonymous said:
[redacted]
Interesting article from across the pond:

https://www.bloomberg.com/news/articles/2020-04-16...

tokyotv

258 posts

127 months

Thursday 16th April 2020
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What’s do you think will happen to the Porsche car market now we have Covid 19 with us for a few months.

I have have my perfect spec 911 Carrera T reserved for purchase..... but should I go ahead?

Is the bottom going to fall out of the market?

Or are enthusiast Porsche’s so specialist they will not be as effected as run of the mill cars...?

So should I spend £70k now or not?

Please advise.

Thanks

footsoldier

2,251 posts

191 months

Thursday 16th April 2020
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not

MrC986

3,481 posts

190 months

Thursday 16th April 2020
quotequote all
tokyotv said:
What’s do you think will happen to the Porsche car market now we have Covid 19 with us for a few months.

I have have my perfect spec 911 Carrera T reserved for purchase..... but should I go ahead?

Is the bottom going to fall out of the market?

Or are enthusiast Porsche’s so specialist they will not be as effected as run of the mill cars...?

So should I spend £70k now or not?

Please advise.

Thanks
Most cars will depreciate regardless of how you use them/when you buy them. You only live once & if you can afford to buy without being financed up to the hilt, I now take the attitude to live for today within reason & it would certainly apply if it was a car in “perfect spec”.

Deanmg

90 posts

144 months

Friday 17th April 2020
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This discussion will equally apply to all assets, especially property.
Only time will tell as to how bad its going to be.

tedblog

1,438 posts

79 months

Friday 17th April 2020
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Only time will tell but we are heading for a slump no doubt about that whatever the asset, 30% knocked off the value of shares and the housing market expected to drop by a sixth. Rough times ahead , people will sit tight and ride the storm , doesnt matter how good the deals are if people dont want to buy?
Will people have the money? The governement expected to borrow 55 billion for this year, now expected to borrow 275 billion , expect big taxes across the range to recoup, fuel, energy etc etc , they reckon it will take a generation to recover ?

Edited by tedblog on Friday 17th April 07:22

Porsche911R

21,146 posts

264 months

Friday 17th April 2020
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tedblog said:
Only time will tell but we are heading for a slump no doubt about that whatever the asset, 30% knocked off the value of shares and the housing market expected to drop by a sixth.

they reckon it will take a generation to recover ?


both rubbish imo !

A lot of shares have just about recovered 2/3rd of what the scare drop was on the 23th march , some are more than pre covid ! but most are now 15% down not 30%

house market to drop by a sixth !!

builders shares are going up every day, we have a housing shortage and they expect people to back to work building in 3 weeks. A strong buy atm.

be no house price drops, there are none for sale !

who are they ? this generation to recover people ?

as for peoples money the leisure staff who got laid off did not want to pick fruit did they ? most are at home on 80% wage !!

HIGH TAX, VAT might go up, they cannot put Tax up that quick due to the bounce back recovery period. As you said no money about !


EU is in trouble, bigger debt and most don't put in only take out !!!

Germany don't want to bail the whole EU out !!

so £ should rise pretty well.



Edited by Porsche911R on Friday 17th April 09:00

northpolar

137 posts

135 months

Friday 17th April 2020
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Truth is that we don't know for sure what the road to release from lock down is going to look like/ how many revisions will have to be made to avoid a second virus hit before a vaccine is available.

Optimistically the economy might have a strong rebound in 4Q2020 - provided lock down can be released pre-summer. I suspect this will be a false optimism - and I could well be wrong. But this uncertainty will lead many parties to hold on to price levels, hoping that a strong market correction will happen later this year. If the rebound does not occur 4Q2020 then that's when I think we'll see the pain hitting hard.

For the chap considering buying a new car, my concern would not be so much about depreciation - buying now, if you are prepared to hold on to it for 4 or 5 years, the market will eventually correct itself. The bigger concern would be how hard could any downturn hit the economy and in turn hit the individual - whether it be job loss/ business loss. Your view on risk management will dictate whether you'd be better served in 2020 holding onto any spare cash you have in case a typhoon day is unleashed upon you. Alternatively, if you feel in a very secure situation, go for it. Safer bet is to hold fire this year and see how this mess pans out.

Peter

Spy

1,302 posts

206 months

Friday 17th April 2020
quotequote all
I am not sure. I think there may be a spike in used car prices post lockdown for the following reasons:

1) There will be many people who were previously in the market for a car and are now waiting for the lockdown to finish
Some may rethink their economic situation but others who are still employed and have cash in the bank, will want to still buy.
Remember, with the lockdown, many people have lower outgoings

2) No new car orders during lockdown means a lower stock of part ex cars flowing into dealerships over the first month or two post lockdown

3) Used car dealers will be desperate for stock as soon as the lockdown is over. The start of the pandemic coincided with the normal buying cycle of the used dealers as they were coming out of Xmas/Winter, leaving them short of stock but rich in cash.

My prediction would be a price spike in used cars for a short period after lockdown whilst the market corrects itself.

av185

18,432 posts

126 months

Friday 17th April 2020
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tedblog said:
Only time will tell but we are heading for a slump no doubt about that whatever the asset, 30% knocked off the value of shares and the housing market expected to drop by a sixth.
Depends on which shares and which property.

And likewise it depends on which cars.

Spy

1,302 posts

206 months

Friday 17th April 2020
quotequote all
av185 said:
Depends on which shares and which property.

And likewise it depends on which cars.
Many share prices dropped but many have recovered to post covid levels and we are not out of lockdown yet. Surprising