Secondhand car price crash?

[Al U]

530dTPhil said:

Spoke with someone I know in the motor trade last week about used car prices. (My brother is looking to change his A4 Allroad.)
He said that a few weeks ago dealers were paying between £1k and £2k over book for good clean cars £20k plus. The market has suddenly slowed and now they are offering £1k behind book for similar vehicles.

On the trek around several Audi dealers to view cars on their websites, the showrooms were completely devoid of customers. One dealer offered £2.5k discount on a £40k order for a new A6 without being asked, quoting sixteen weeks delivery.

Coincidentally I was in the local (Bristol) Audi dealer today for a 'while you wait' MOT and the chap next to me in the waiting area was told by one of the sales people that they are not buying in any stock at present as nothing is selling.

Excellent. I (and my funds that are burning a hole in my pocket especially when it's nice weather) await the impending fire sale

I do wonder what will happen when the barrage of new stock starts getting churned out as plants get back to full capacity against a back drop of less people wanting to buy a brand new car.

Edited by Al U on Wednesday 22 June 18:09

[Superflow]

530dTPhil said:

Spoke with someone I know in the motor trade last week about used car prices. (My brother is looking to change his A4 Allroad.)
He said that a few weeks ago dealers were paying between £1k and £2k over book for good clean cars £20k plus. The market has suddenly slowed and now they are offering £1k behind book for similar vehicles.

On the trek around several Audi dealers to view cars on their websites, the showrooms were completely devoid of customers. One dealer offered £2.5k discount on a £40k order for a new A6 without being asked, quoting sixteen weeks delivery.

Coincidentally I was in the local (Bristol) Audi dealer today for a 'while you wait' MOT and the chap next to me in the waiting area was told by one of the sales people that they are not buying in any stock at present as nothing is selling.

Yep.

Happening already and come winter happy days!.

[samoht]

The last two significant economic shocks, 2008 and 2020, saw car prices mostly rise (after initial wobbles), not fall. Hence it's not unreasonable to imagine the same pattern continuing.


However what's different now is 9% inflation, bringing with it the real possibility of high interest rates. Between March 1981 and October 2008, the Bank of England interest rate was set at or above the prevailing rate of inflation, so the current situation of 1.25% interest rates against a 9% inflation rate is unusual and could well be changed by the BoE if inflation persists.

Upshot is, we've had 21 straight years of low inflation and thus low interest rates, no higher than 6%. Back in 2001, the five top-selling brands were Ford, Vauxhall, Peugeot, Renault and VW in that order. In 2021 they are VW, Audi, BMW, Ford and Toyota - mainstream brands out, premium ones in.

Now if you can borrow money for negligible interest rates, then there is no difference in the monthly cost between a cheaper mass-market car with poor residuals, and a 'premium' Audi or BMW with stronger retained value - 20% depreciation on a £30k car costs the same as 30% loss on a £20k one. And of course, if you offer people a Ford or a BMW for the same monthly payment, nine out of ten cats will choose to drive around in the German option - it's a 'no brainer' to most people.

So cheap borrowing has been a vital ingredient in the market shifting to premium brands. If that goes away, it could drive a marked shift in purchasing habits, as financing a more expensive car moves out of reach for many.


You also have the question of supercar buying. Chris Harris went through a period of being a public exemplar of man maths, putting down big deposits to get behind the wheel of newish Porsches and Ferraris for a just-about-affordable monthly payment. Financing a £100k-£250k car is obviously a lot more expensive at double-digit interest rates. So the number of people 'doing a Harris' is going to be reduced, and that's just based on interest rates, without even considering the extent to which people might have less money to spend or be less keen to spend it in hard times.


I can't predict the future, but it's clear that the current relationship of interest rates to inflation rates is highly unusual historically, so if nothing changes we're in uncharted waters, and if one of those does change, the most likely is the interest rate, in which case we're not in uncharted waters but we are back where we last were 40 years ago.

[fridaypassion]

Interest rates are still decent for the Supercar stuff but residuals are coming down. The industry is bracing for sure.

[ToastMan76]

Its not all that weird though, if you look at new car RRP’s they have increased well above inflation the past 10 years. The past 3/4 years in particular RRPs have gone bonkers, with boggo cars going for silly money. Example I use my Mazda3 was around £18k brand new in 2015, now a slightly better spec is £26k+. This is replicated across all manufacturers, I did another example of our TT which had a lower RRP and £5k contribution in 2016, but is now £35k. Manufacturers have been making more profit now than they ever have (VW made +451% profit last year). Prices are only going one way on new, and that drags up GMFV’s in the used market further increasing Used prices at end of terms.

As inflation hits across Europe, a £20k car needs to be £22k to cope with 10% inflation. I dont expect used prices to decline much more than now even when the taps come on, because the model is no longer massive volume but an emphasis on profit.

[Fusion777]

RRPs have only ever increased though, as far as I can remember. I recall when you could get a Clio for £6k, Fiesta for £7k, 3-Series for £16k, 911 for £53k, and so on. Adjusted for inflation they would have been closer to today's prices, but still not quite there. Today's cars are much better though in pretty much all regards.

[Theoldguard]

Fusion777 said:

RRPs have only ever increased though, as far as I can remember. I recall when you could get a Clio for £6k, Fiesta for £7k, 3-Series for £16k, 911 for £53k, and so on. Adjusted for inflation they would have been closer to today's prices, but still not quite there. Today's cars are much better though in pretty much all regards.

You would have thought though that automation and better logistics, supply chains, technology would have kept a lid on those prices. Cheap labour for many components, finance packages with financial wings of the manufacturer have brought in alot of extra revenue above the rrp and not forgetting how cheap the money has been to borrow for these manufacturers.

Where they have been forced into extra costs are for safety features and the ever increasing on board tech in order to compete.

Price of alot of new cars are now well beyond that of a working man without getting some serious finance.

Maybe the incoming downturn / recession is the reset everyone needs.

[Register1]

Wife is interested in buying a MG ZS EV.
Could be new, or good value used.
Must be white

I don't believe she wants all the bells and whistles, so even a lowerspec would see her spending money.

Then again, she is unsure if to "Lease - Buy" by paying a balloon payment, and keep the car at end of lease.

Any ideas chaps ?

Edited by Register1 on Thursday 23 June 19:34

[anonymous-user]

Fusion777 said:

RRPs have only ever increased though, as far as I can remember. I recall when you could get a Clio for £6k, Fiesta for £7k, 3-Series for £16k, 911 for £53k, and so on. Adjusted for inflation they would have been closer to today's prices, but still not quite there. Today's cars are much better though in pretty much all regards.

I purchased a new Renault Clio in 2002, at the time it cost £8800 including metallic paint. According to the Bank of England inflation calculator that is the equivalent of £13,174 today. Looking on the Renault website, the cheapest Clio is now £18,795 + £600 for paint.

One other thing, I have noticed the GFV for some PCPs are falling which will increase the monthly payments.

[Throttlebody]

530dTPhil said:

Spoke with someone I know in the motor trade last week about used car prices. (My brother is looking to change his A4 Allroad.)
He said that a few weeks ago dealers were paying between £1k and £2k over book for good clean cars £20k plus. The market has suddenly slowed and now they are offering £1k behind book for similar vehicles.

On the trek around several Audi dealers to view cars on their websites, the showrooms were completely devoid of customers. One dealer offered £2.5k discount on a £40k order for a new A6 without being asked, quoting sixteen weeks delivery.

Coincidentally I was in the local (Bristol) Audi dealer today for a 'while you wait' MOT and the chap next to me in the waiting area was told by one of the sales people that they are not buying in any stock at present as nothing is selling.

Seems about right.

Also, the latest data from Indicata has a 1.9% fall in used car prices in Q1. Prices are coming down.

[Pistonheader101]

prices don't seem to be dropping. I thought big diesel SUV's would drop off a cliff, but no they haven't.

[Superflow]

Pistonheader101 said:

prices don't seem to be dropping. I thought big diesel SUV's would drop off a cliff, but no they haven't.

If you’re in the market call and make some cheeky offers you may surprise yourself.

Discounts are happening on autotrader.It doesn’t matter about supply when there is little demand as we head into recession it is just a matter of time.

[menousername]

From my limited view - px offers have plummeted but dealers are trying to hang on to their elevated asking prices for their stock. From what I have shortlisted not much is selling but prices are not budging even slightly

I think the thought process is that buyers will be happy to stick the difference on finance and not worry about the drop in px value

[mike74]

Al U said:

Excellent. I (and my funds that are burning a hole in my pocket especially when it's nice weather) await the impending fire sale

I do wonder what will happen when the barrage of new stock starts getting churned out as plants get back to full capacity against a back drop of less people wanting to buy a brand new car.

Edited by Al U on Wednesday 22 June 18:09

I thought according to some we're supposedly entering a whole new age of low volume-high price from the manufacturers?

And the days of pile 'em high and sell 'em cheap are now behind us?

[ToastMan76]

mike74 said:

I thought according to some we're supposedly entering a whole new age of low volume-high price from the manufacturers?

And the days of pile 'em high and sell 'em cheap are now behind us?

100% are doing. VW made +451% profit on -7% TO. Ford would have been similar but had to write off $6b of a Rivian stake - but still made +$18b in 2021 compared to -$2b in 2020. Merc now make on average +€49k per unit and in 2019 made €10b compared to 2021 €29b. This is the case for all manufacturers, as there is no ‘disruptor’ model - customers want the badge and are willing to pay for it.

[Teaspoonasaurous]

I've been following 2013/14 panameras on autotrader for the last month or so.
Prices have been steadily falling. Question is how bad will it get, I reckon September could see a bloodbath.

[MuscleSedan]

Superflow said:

Pistonheader101 said:

prices don't seem to be dropping. I thought big diesel SUV's would drop off a cliff, but no they haven't.

If you’re in the market call and make some cheeky offers you may surprise yourself.

Discounts are happening on autotrader.It doesn’t matter about supply when there is little demand as we head into recession it is just a matter of time.

That type of car now appears to be creeping down in value. A main dealer I drive past has had a Touareg for months. It has slowly been reduced from £26k+, now at £24k and still there. It shows at under £20k on WBAC.

Got a neighbour with a Q7, chatting the other day she mentioned the current fuel prices and that she had just spent £180 to fill it up again. Is that sustainable for everyone who is doing that ?

[Theoldguard]

MuscleSedan said:

That type of car now appears to be creeping down in value. A main dealer I drive past has had a Touareg for months. It has slowly been reduced from £26k+, now at £24k and still there. It shows at under £20k on WBAC.

Got a neighbour with a Q7, chatting the other day she mentioned the current fuel prices and that she had just spent £180 to fill it up again. Is that sustainable for everyone who is doing that ?

Things are starting to bite now, a few people I am in regular contact with who you always know are ok for money are starting to justify why they need the car they have, they probably do 20-30 miles a day at most, but have something that rarely gets above 25mpg, I think its human nature, when your having to pay more for something like fuel but you get nothing more back in return, if its an extra £100 a month for a new car that's different, but £100 per month to fill the same car compared to last year is starting to make people think, and few I talk to believe that prices of energy and fuel are going to come down anytime soon.

The wife has an EV and more and more people are starting to ask us about it, I am now driving around in a 12 year old SUV, all paid for and so outside of the usual its quite cheap to keep / run, but even so with getting mid 40s per gallon, its still a killer when £100 does not fill the tank.

The nicer evenings we have been out walking and often pass a few garages, some have a couple of gas guzzlers at the front, gleaming in the evening sun, but have been there now for weeks and not just those but other higher priced models. You do wonder that if they do not sell now when more people are out and about in the nice weather, how the hell they are going to sell when the darker nights and poor weather sets in, higher energy bills become reality when the heating goes back on and inflation creeps even higher and with it IR that will make finance that little bit more costly. I just don't see much of this stock moving unless prices drop quickly and by an amount that makes people just consider parting with their cash.

Edited by Theoldguard on Saturday 25th June 19:31

[M4cruiser]

Pistonheader101 said:

prices don't seem to be dropping. I thought big diesel SUV's would drop off a cliff, but no they haven't.

Agreed, at the lower end of the market, still high prices.
Having read the posts on this thread talking about £20K+ used cars, and thinking which planet are they on .... at "my" end of the market there has been no reduction.
I'm browsing AutoTrader a lot, and cars which 2 years ago were in the range £600 to £800 are now £1,600 to £2,900.
I mean, these are cars which are just above the "MoT failure" and "non-runner" or "simple fault easily fixed" (yeah, right) level.

[ChrisH72]

In contrast, small economical cars are selling like hot cakes. I've been helping a colleague look for a small hatchback after her previous car died last week. She really wants a Fiesta Econetic tdci with a budget of around 5k. Every one she's found that looks half decent has already sold. There is one available not too far away which she wants to view but the dealer had already said its asking price only.