Values in the used car market have been on a roller coaster ride since last year, but what caused the volatility?

Derren Martin, head of UK valuations at cap hpi, is clear on the causes. He believes the drops constitute a “price realignment” following rises in 2017 and 2018, an unusual phenomenon for traditional depreciating assets.

He also singled out high supply levels following the influx of cars entering the used sector from the record breaking new car markets of 2015 and 2016 which totalled over 2.6 million registrations.

This perfect storm was completed by an easing of demand, hardly surprising with consumer confidence dented by Brexit and economic uncertainties.

However, Martin points to a slowing down of value drops in both July and August after a tumultuous period of successive month-on-month and year-on-year falls.

“The used car market pricing realignment has been ongoing since the end of 2018 and accelerated from Easter onwards. Our Live values data points to a more stable period ahead as demand and values are more closely aligned.”

A return to more “normal” trading conditions was also flagged up in Cox Automotive’s Market Insight Overview for August which noted improved demand in the wholesale market.

Philip Nothard, Customer Insight and Strategy Director - Cars, said: “Average values were stable in August. The realignment of the pricing guides that we’ve seen over the past two months stimulated demand in the wholesale market, generating strong conversion rates across the month.”

If the book drops continue to slow down then we can expect to see improved margins. This, of course, will be welcome news for dealers who can finally concentrate on the issues they have control over.

By Curtis Hutchinson

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