“Unprecedented” used car price increases to continue into Q3, VRA predicts

Current “unprecedented” used car price increases are likely to continue into the third quarter of 2021, the Vehicle Remarketing Association (VRA) is predicting.

VRA chair Philip Nothard said that the view of both vehicle valuations experts and dealers who are part of the trade body indicated that there remained headroom for further rises on top of almost double digit percentage increases in recent months.

“We recently held a webinar with experts from AutoTrader, cap hpi and Cazana, and the general consensus was that the used car sector has never seen anything like the current conditions. We are in a kind of ‘perfect storm’ where stock is in very short supply, demand is high, and buyers are ready to spend freely.

“This is having all kinds of effects across the market. It is not simply that prices are rising but that stock turnaround is very fast and there are also signs that dealers are finding that they can increase margins.

“In fact, there is a general view that dealers could be even ‘braver’ when it comes to higher pricing, and this is something that we expect to see happening into Q3.”

A further point, he said, was that the situation was changing the kind of stock dealers would normally retail.

“This trend is taking forms that you would probably expect, such as franchise dealers switching even more of their activity into used sales.

“However, many dealers are having so much trouble getting hold of stock that they are retailing almost everything they take in part exchange. Those who specialise in 2-6-year-old stock, for example, might be happy to now sell a 10-year-old car.”

The question remained as to whether this situation was advantageous for dealers in both the short and medium term, he said.

“Prices are high and margins are probably higher but, because of stock shortages, volumes are lower. The winners in this situation will almost certainly be those dealers who are managing to maintain a strong supply of cars. However, doing so is difficult.”

Philip added that there was also recognition within the VRA that the current situation could not continue.

“At some point, we will see a levelling off of values as supply increases and demand normalises, although it does not appear to be imminent. The question is whether we will see a noticeable readjustment in values or something more subtle at that point.

“The danger is, of course, that dealers could be left holding stock that is falling rapidly in value but, so far, there is simply no sign of that occurring.”

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