Will Coronavirus hit used car prices?

[Wooda80]

Throttlebody said:

UK new car sales for May. Keep your eye on the big picture and longer term.

@Throttlebody

You are correct in your assertion about bigger pictures and longer term. Whilst this thread is about used cars the new car market has a large bearing on the supply of used cars as old ones are part exchanged.

Would you care to share your expert insight and analysis to guess forecast where you expect June 20 registrations will be vs June 19?

[Butter Face]

Throttlebody said:

Butter Face said:

So, what you’re saying is that, even when closed for another month, the new car market was up 8%? And actually the private market was ‘only’ down 83%? Not too bad I’d say.

It was 97% down YOY in April!

Anyway, this thread is about used car prices.

Do you only sell used cars?

I sell both.

You?

Ahhhhhh.

[maz8062]

There has been a massive shift in the way we do business as a country. It is unbelievably crazy out there. Social distancing is ott IMHO, and it'll have a major impact on the economy if it continues.

Take today for example - I fancied buying a multi-meter so popped down to the local Screwfix. "Sorry, you can't come in," said the burly chap at the door. They now do click and collect only, so you order online while parked outside in your car, wait for a text message to say your item is ready and then you queue (outside) for 10 minutes or so to pick up your item. When in the store, there is only one cashier and you're instructed to stand 2 metres away and hola your reference number. This is a store that used to be teeming with staff taking orders - now they need a fraction of the number - the question is when will they revert back to days of old, if ever? And the staff?

An employer that has furloughed his/her staff will need to see some semblance of recovery before they'll consider taking the staff back on. The expectation is that recovery will not be until next year, so once furlough ends redundancy will surely follow for the majority.

Until a vaccine is found we're in for a tough time of it.

[Thankyou4calling]

We had a few guesses earlier.

June 2019 sales were 223,000.

I’m going for 160,000 this year.

[Throttlebody]

Wooda80 said:

@Throttlebody

You are correct in your assertion about bigger pictures and longer term. Whilst this thread is about used cars the new car market has a large bearing on the supply of used cars as old ones are part exchanged.

Would you care to share your expert insight and analysis to guess forecast where you expect June 20 registrations will be vs June 19?

You are correct about the link between the new and used car market. They are intrinsically interlaced.

With forecast June registrations, you be reactive proactive and let’s see if we agree.

[Butter Face]

Throttlebody said:

Wooda80 said:

@Throttlebody

You are correct in your assertion about bigger pictures and longer term. Whilst this thread is about used cars the new car market has a large bearing on the supply of used cars as old ones are part exchanged.

Would you care to share your expert insight and analysis to guess forecast where you expect June 20 registrations will be vs June 19?

You are correct about the link between the new and used car market. They are intrinsically interlaced.

With forecast June registrations, you be reactive proactive and let’s see if we agree.

Not a gambling man eh? Go on, stick your neck out, give us a %.

[Wooda80]

maz8062 said:

I don't understand the connection between the price a trader pays for a car and its potential impact on used car prices. There's supply-side and demand-side. I think it'll be the demand that will dictate the direction of prices.

The price a dealer pays for a car is a function of what he thinks he can sell it for.
Price guides such as CAP reflect in part the trade prices paid by dealers in the recent past.
If dealers are now paying more for a car than they did previously ( ie more than the published CAP price ) then it's an indication that they expect to be able to sell the car for more than they have done previously.
It works the other way around too - if dealers are paying much less than CAP price then their confidence in being able to sell for the same as last month has been eroded.

There are no guarantees though. One's expectations can turn out to be wrong and it's not completely unknown for a dealer to end up selling a car for less than he paid.

[mike74]

nickfrog said:

Good to hear. It is all about spirit and attitude. Thankfully the terminally disgruntled living with their parents and hoping for the worst are in a minority.

Careful now, your veneer of breezy insouciance is in danger of looking a bit thin... it could give the impression that actually you're stting yourself at the prospect of an economic downturn along with some of the other contributers to this thread.

[Inky81]

Wooda80 said:

maz8062 said:

I don't understand the connection between the price a trader pays for a car and its potential impact on used car prices. There's supply-side and demand-side. I think it'll be the demand that will dictate the direction of prices.

The price a dealer pays for a car is a function of what he thinks he can sell it for.
Price guides such as CAP reflect in part the trade prices paid by dealers in the recent past.
If dealers are now paying more for a car than they did previously ( ie more than the published CAP price ) then it's an indication that they expect to be able to sell the car for more than they have done previously.
It works the other way around too - if dealers are paying much less than CAP price then their confidence in being able to sell for the same as last month has been eroded.

There are no guarantees though. One's expectations can turn out to be wrong and it's not completely unknown for a dealer to end up selling a car for less than he paid.

This takes me back 20+ years. There is a demand-side and supply-side, but it all depends on how elastic each side is. Anyone else remember this?

If demand is rigid and consistent but supply is variable - then supply dictates prices.
If supply is rigid, but demand variable, then demand dictates prices. In most cases, it's a balance between the two.

Take for instance petrol prices (in normal times, Covid aside), demand is fairly consistent (inelastic), but supply is variable (elastic)- which is why the price you pay at the pump is subject to how many barrels OPEC decide to produce that week.

My view (I'm outside of the direct industry, but linked) is that supply of used vehicles is lower than normal, which is sustaining prices. Once we see the supply side opened up (all the parked up ex-lease cars entering auctions), the supply will become less of an issue, and we'll all see how much demand (or lack therefore) there really is. As many have said on here, it's too early to tell yet.

Edited by Inky81 on Saturday 6th June 20:03

[maz8062]

Wooda80 said:

maz8062 said:

I don't understand the connection between the price a trader pays for a car and its potential impact on used car prices. There's supply-side and demand-side. I think it'll be the demand that will dictate the direction of prices.

The price a dealer pays for a car is a function of what he thinks he can sell it for.
Price guides such as CAP reflect in part the trade prices paid by dealers in the recent past.
If dealers are now paying more for a car than they did previously ( ie more than the published CAP price ) then it's an indication that they expect to be able to sell the car for more than they have done previously.
It works the other way around too - if dealers are paying much less than CAP price then their confidence in being able to sell for the same as last month has been eroded.

There are no guarantees though. One's expectations can turn out to be wrong and it's not completely unknown for a dealer to end up selling a car for less than he paid.

Yes, but unless a trader is bidding on a car safe in the knowledge that he already has a buyer for said car, plus a profit, the bidding is really only against another or other traders, all of whom may have the same idea or are just bidding the market up.

Again, we don't know what these trade only auctions reveal in terms of a trend or expectation, but I'd caution against using this as an indicator of where used prices may or may not be in the future.

[Auto810graphy]

Inky81 said:

Understood, and I'll bow to your knowledge given you're in the trade, but aren't volumes going through auctions significantly lower than this time last year - meaning supply is an issue which is holding prices where they are?

If so, will be interesting to see where prices go once supply isn't the issue, demand is...

Edited by Inky81 on Saturday 6th June 17:13

When I last looked at BCA they had over 10,000 vehicles available when they normally have about 14,000 but take this with a pinch of salt as this it’s all about how many are going into each sale.

If anything there could be more volume than this time last year as Motability returns and lots of main dealers PX cars are only just being sold off from March plate change.

The coming months will be interesting and as I mentioned earlier, for our business we are not looking to be holding much stock and will be moving all return cars on quickly.

[Auto810graphy]

Throttlebody said:

UK new car sales for May. Keep your eye on the big picture and longer term.

I think that’s a cracking result as we could not even register vehicles for most of April and May.

[Inky81]

Auto810graphy said:

When I last looked at BCA they had over 10,000 vehicles available when they normally have about 14,000 but take this with a pinch of salt as this it’s all about how many are going into each sale.

If anything there could be more volume than this time last year as Motability returns and lots of main dealers PX cars are only just being sold off from March plate change.

The coming months will be interesting and as I mentioned earlier, for our business we are not looking to be holding much stock and will be moving all return cars on quickly.

Cheers, good insight.

[Wooda80]

Throttlebody said:

.

With forecast June registrations, you be reactive proactive and let’s see if we agree.

Reactive would be regurgitating other people's stats with no insight of the extraordinary circumstances in which they took place

If you truly understood what you were talking about you would be able to explain why those same extraordinary circumstances would lead to June's figures actually being higher than than June 2019.

[Deep Thought]

maz8062 said:

Deep Thought said:

Throttlebody said:

Deep Thought said:

Watching some auctions on the trade online site i follow.

2015 320d M Sport in an ok but not exceptional spec has already got bid above CAP clean. Has three curbed alloys, a couple of parking dings and two bumper scuffs to sort out too.

Leggy 2012 Q5 in white hitting CAP clean also with two days to run.

2016 M4 made +£1,100 over CAP clean.

31 cars currently listed. Bidding seems to be back to pre COVID levels with desirable stuff making over CAP clean and mainstream cooking variants making CAP clean.

Will be interest to see how long that continues for.

Edited by Deep Thought on Saturday 6th June 14:41

In tough times people prefer to buy used cars.

This is a thread discussing the potential for price drops of used cars. I'm reiterating what i'm seeing on a used car trade site.

I don't understand the connection between the price a trader pays for a car and its potential impact on used car prices. There's supply-side and demand-side. I think it'll be the demand that will dictate the direction of prices.

If the trade were paying way behind book, it would suggest a weak market.

If the trade are paying book prices (and above for the right car) then that suggests a strong market.

A strong market suggests they wont feel any urge to drop prices.

Assuming they have a standard margin to work to, paying book price for a car in need of further remedial work, or above book suggests prices could move be moving upwards slightly at this stage.

EDIT: Ah - i see a car sales person had answered already.

Edited by Deep Thought on Saturday 6th June 20:15

[nickfrog]

mike74 said:

nickfrog said:

Good to hear. It is all about spirit and attitude. Thankfully the terminally disgruntled living with their parents and hoping for the worst are in a minority.

Careful now, your veneer of breezy insouciance is in danger of looking a bit thin... it could give the impression that actually you're stting yourself at the prospect of an economic downturn along with some of the other contributers to this thread.

Hi Mike, I can't speak for others but there is no insouciance at my end, that's in your head (which I am grateful for you letting me live in rent free).
There is a serious downturn already, it's not a prospect.
On the plus side, the FTSE is bouncing back nicely with quite a few funds already over their pre C19 peak so not too shabby all round.

[Deep Thought]

jimPH said:

I think most of the redundancies are due to expectations. If things continue, they'll be rehired quickly.

The biggest change will be tourism and travel once that flips to full beans, it will be full steam ahead.

Agreed. It will be interesting to see how long it is before the likes of Spain cave in and let UK tourists in. It could be just a matter of weeks.

Hotels are being allowed to reopen here very soon, so again, theres another area opening up again.

I also expect to see the 2m distancing to be dropped to 1m in some circumstances soon too to facilitate this.

Also the two week quarantine for air passengers will be dropped to international only soon also.

[Deep Thought]

Butter Face said:

Throttlebody said:

Wooda80 said:

@Throttlebody

You are correct in your assertion about bigger pictures and longer term. Whilst this thread is about used cars the new car market has a large bearing on the supply of used cars as old ones are part exchanged.

Would you care to share your expert insight and analysis to guess forecast where you expect June 20 registrations will be vs June 19?

You are correct about the link between the new and used car market. They are intrinsically interlaced.

With forecast June registrations, you be reactive proactive and let’s see if we agree.

Not a gambling man eh? Go on, stick your neck out, give us a %.

Of course hes not - he was telling us by now car dealers would be pleading with customers to take their cars away at any price just to get cashflow as their businesses burned behind them.

If hes been so wrong about that then it calls in to question all his other "predictions".

[Deep Thought]

maz8062 said:

Yes, but unless a trader is bidding on a car safe in the knowledge that he already has a buyer for said car, plus a profit, the bidding is really only against another or other traders, all of whom may have the same idea or are just bidding the market up.

Again, we don't know what these trade only auctions reveal in terms of a trend or expectation, but I'd caution against using this as an indicator of where used prices may or may not be in the future.

They could be - and probably are - buying to replace stock and gaps in their forecourt, hence the strong bidding.

Edited by Deep Thought on Saturday 6th June 20:19

[Deep Thought]

Throttlebody said:

Meanwhile - outside of the odd showroom, Bentley is now cutting 25% of it’s workforce after having 66% of them furloughed.

Whilst thats terrible for those affected, even in a likely to be hard hit new car sector the small positive to be found is that the 66% furloughed didnt lead to 66% redundancies.