2020 has been a strange year for the used car market. The impact of Covid-19, and the lockdown that came along with it, has been felt in dealerships across the country. But it’s also had knock-on effects in the used market more broadly. So, what’s going on? What are the factors at work, and what influence might they have in driving up demand for used cars?
Demands vs Supply
According to analysis from the Society of Motor Manufacturers and Traders (SMMT), the UK used car market slumped an astonishing 48.9% in the second quarter, with just over a million transactions taking place nationwide. With that said, the pace of decline has eased in accordance with the gradual loosening of the lockdown over the same period.
Much of this decline can be attributed to a lack of supply. The infrastructure wasn’t available to sell cars at the same volume as before. But the demand for new cars had also slumped; with more workers doing their jobs remotely, the need for new vehicles has dwindled. With that said, many commuters looking to make the switch from public transport have been looking to the used market for a stop-gap solution.
Given that demand has largely outweighed supply, the residual value of the average used car has remained buoyant. But the economy is now in recession, and the severity of the downturn will determine the extent of the rise in unemployment that comes as a result of the end of the furlough scheme. With fewer people having disposable incomes with which to finance major purchases, the demand for used cars will likely slip away, and prices will start to fall. Having said that, there are plenty of financing options available online, from firms like Go Car Credit, via which customers might make the investment, even if cash reserves aren’t what they once were.
According to Auto Trader’s commercial director, Ian Plummer, pent-up demand cannot solely explain the sharp uptick in prices and sales which arrived during summer. The company polled around six-thousand motorists, and found a sharp rise in the number of people expressing an intention to buy within the following three months. Moreover, 42% of these would-be buyers said that they were either first-time buyers or looking for an additional car. This would imply that the market will enjoy plenty of demand over the months to come.