Auction Wholesale Market
As expected, the rate of recovery of the used car market in the UK slowed a little in August. The key metrics of First Time Conversion Rate, Percentage of Original Cost New, and Sales observations Index ended the month lower than for July, although all still performed better than in August 2019. This suggests that “normality”, or what passes for that in these strange times, is returning to the market.
Taken at face value, the month-on-month reductions may be thought of as a bad thing. However, as with most statistics, it is important to consider a longer-term view. Although auctions remain only online, sale volumes are higher than at the same time last year and the decline from July is minor. There is a degree of “catch up”, but as the whole market was frozen during the lockdown, there is not a particularly large build-up of unsold stock with vendors.
Cars may not have been selling during the lockdown, but at the same time, they were also not being de-fleeted or part-exchanged. The high first-time conversion rate suggests that demand is keeping up with supply. This is supported by the average percentage of original cost new showing that buyers are keen to buy and are prepared to pay good money.
Wholesale buyer demand
Sales of SUVs and convertibles have been noticeably strong since auctions resumed, the latter helped by the excellent summer weather. One area of the market where the Glass’s Editorial team continues to monitor very closely are alternative fuelled cars, especially battery electric vehicles (BEVs) as demand for these continues to fluctuate every month.
Used Retail Market
The Used Retail Market continues to perform well. The number of observed sales has improved slightly over July but is still lagging behind the same period last year. However, like the wholesale market, the average sale price is notably higher than at the same point last year.
Glass’s Live Retail pricing tool also shows that the average time a car spends on the forecourt continues to decrease and is at virtually the same level as last year – 45.5 days for August 2020 compared with 42.1 days for August 2019. This measure is a good indicator of the level of used car retail demand and the rate of improvement suggests that September’s value should show further improvement.
Despite the challenges resulting from an online-only wholesale market and socially-distanced retailing, it appears that both the wholesale and retail used car markets have largely recovered, or even improved on pre-lockdown levels. Whilst is it tempting to be enthusiastic and positive about their prospects we are still operating in very uncertain times. A second full national lockdown is highly unlikely, although not impossible. However, localised and regional lockdowns are already in use and will continue through to the end of the year, and probably into 2021.
However, there is no harm in a bit of cautious optimism. September brings the new 70-plate and September’s new car registrations may exceed those of March; another example of the way 2020 has been turned upside down by COVID 19. New car registrations generate used car activity. This means that through September, especially the latter part, there are likely to be improvements in the key metrics for both the wholesale and retail markets.