Dealers are buying lower grade used car stock at auction because of stock shortages and high demand for the best vehicles.
That’s the view of the Vehicle Remarketing Association (VRA), which said dealers who would normally only acquire grade one or two cars were settling for grade three vehicles and then spending money on refurbishment.
Glenn Sturley, chair at the VRA, said: “Stock shortages and subsequently high prices have reached a point where many traders simply cannot get hold of the stock in the condition they want.
“Most of these traders don’t want to actually retail poorer quality stock, so the compromise they are making is to buy vehicles in poorer condition and then invest in making them suitable for their forecourts.
Many buyers will inevitably be nervous of this shift. The challenge of accurately estimating repair costs through a visual inspection intensifies with the more attention that the vehicle requires.
Sturley said that the trend was also leading to an increase in demand for vehicles in grade three condition, and that a greater gap in trade values was potentially emerging between the top three grades and the bottom two.
“A large number of traders won’t go below grade three because, at that point, the cost of bringing a car up to retail condition can be prohibitive. The possibility of making a profit becomes even more of a gamble.
“However, with factors such as Brexit and general economic uncertainty causing consumer confidence to falter, we expect to see the used car market continue to remain buoyant in comparison to the new sector well into 2019.
“Certainly, there is no reason to expect that the current, high used car prices will fall, so the trade will continue to have to adopt strategies such as buying poorer vehicles and upgrading them for the foreseeable future.”