News from Cap HPI that used car values have plateaued come as little surprise. However, with new car supply remaining constrained, albeit it is starting to regain momentum and the new car focus on electric cars, which candidly are more expensive to purchase than their fossil-fuel equivalent predecessors, then I find it hard to see anything other than a modest realignment in values in the months ahead. After all, the supply of new-2 year sold stock will inevitably remain low for many months to come.
The change in the market right now is the shortage of buyers. For the first time in many months, we have seen a return to a seasonal norm. Christmas is coming and pretty much everyone wants to make up for the situation last year. Classically, this was the time of year when the available buyers were people who had to buy a car rather than those choosing to buy one. It does appear to be the case right now.
At the same time, we cannot ignore some other negative headwinds. Inflation has risen to 4.2% (Consumer Price Index), the highest inflation rate reported since 2011. Used cars were referenced by the Office for National Statistics as one of the notable drivers being this rise. Cars apart, prices are rising in many areas consumer confidence had been in decline. However, on November 19th, GfK’s long-running Consumer Confidence Index increased three points to stand at -14 in November.
Good thought this may be, the assessment by GfK is that the improvement is likely to be linked to a Christmas ‘splurge’ to enjoy the type of Christmas they missed out on in 2020 (I’m glad they agree with my view!)
I doubt any of this will come as news to dealers; they will simply be disappointed that the momentum gained this year has tailed off.
One part of stocking that is harder to speculate upon will be stock levels. Traditionally November and December have seen dealers de-stocking to an extent. Throughout much of this year, this has been the default position as a result of stock shortages. In my conversations with dealers, I sense there is some de-stocking but only at a limited level and that trade buyers are in short supply.
So, to bring this assessment to a conclusion, agility in stock management remains crucial, but let’s be honest, wasn’t this always the case?
Debbie McKay, Head of Motor Major Accounts