“The old adage ‘what goes up must come down’ doesn’t seem to apply to used cars, at least not for the time being. The unprecedented increase in average used car values that we’ve seen in the last 12 months shows no sign of a major reversal. Our expectation is that this new level of pricing will be the norm for the coming months.
“The shortages of stock that have been the primary driver of price increase, looks set to continue – particularly as we come up to the third anniversary of the Covid outbreak and the severe shrinking of the new car market. Put simply, for prices to fall, the supply of used cars needs to increase dramatically, and we expect that this is unlikely to happen.
“However, low consumer confidence means that these high prices do not necessarily mean the profit levels that many dealers benefited from post-lockdown. We know from our Consumer Insight Panel research just how much the tougher economic conditions are suppressing demand, with one in five car purchases being delayed because of the cost of living crisis.
“This still translates into a significant volume of used car transactions, as many purchase decisions are led by necessity to change. However, affordability challenges may mean that consumers are looking to lower priced cars and this creates an imbalance as these cars are more expensive than they used to be.
“Opportunities will continue to exist, but dealers will need to be smart to consumer appetite, sourcing the right types of cars and marketing them quickly and effectively. Consumers will be nervous, providing the opportunity for dealers to outperform the market by providing a supportive sales approach sympathetic to the pressures that every household is feeling.”
Phill Jones, head of eBay Motors Group