The average used car wholesale value had dropped 2.5% by November’s mid-month point, furthering the 4.2% decline that Cap HPI recorded in October.
Derren Martin, director of valuations, told AM last week that there were signs of a stabilisation as the decline slowed, adding: “Therse cars are now starting to look a little bit better value”.
“There’s no escaping that this is a significant realignment. But generally cars are still a lot more expensive than they were before those 2021 price increases. At the moment they are still around 18% more than they were.”
Fleets and leasing companies have realised they can sell three-year-old cars at a lower percentage of Cap now, because prices went up so dramatically since they took the cars on their books.
They are lowering their expectations to try to entice dealers to buy.
The 2.5% fall for three-year-old cars equates to a £450 drop on average.
Cap HPI expects consumer demand for used cars to strengthen in January and Martin said some dealers are preparing to stock up ahead of Christmas ready to retail, albeit “picking off” vehicles rather than buying in bulk at present. Many dealers are mindful of their stocking charges due to the high interest rates.
“It’s a balance really because values will probably continue to drop through December and maybe even slightly in January. But if you want to take advantage of that uptick in activity post-Christmas you’ve got to buy, and that activity can start from Boxing Day.”
Access to stock is not a big issue. Currently the conversion rate at wholesale channels is around 50%, compared to 70% at the end of spring, so unsold cars are re-cycling through, he said, plus manufacturers could well be driving new car registrations into the fleet sector at year-end which could put more de-fleeted stock into the market.