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Used car market gathers pace
As expected, the UK used car auction market continued to gather pace following the easing of some restrictions in March. Sale volume and first-time conversion rate both continued the improvements seen for March, albeit not to the same degree, whilst the percentage achieved of the original cost new also increased month-on-month. In summary, the three key metrics all continued to move in the right direction, with more cars sold first-time and for more money.
Demand continued to grow during the month, with premium SUVs and convertibles particularly sought after. Cars that required work were less desirable, so whilst there was a clear demand for vehicle stock, whether to fill up sites depleted during the lockdown or to prepare for increasing demand, it is clear that buyers were generally looking for cars ready for customer sale with the minimum delay or additional expenditure.
Used Car Retail Market
The metrics for the used car Retail market continue the positive theme from March. The number of observed sales increasing 13.6% – not as strong as the surge seen for March, but impressive nonetheless. The average sale price decreased a little. This is likely due to the increase in the sales of lower-priced cars. Buyers of these cars appeared to be less keen during the lockdown, which was reflected in the auction results, but the opening up of retail sites to more “normal” sales procedures saw a boom in demand at the auctions as retail demand increased.
Glass’s Live Retail prices measure the length of time a car spends on the forecourt, with a shorter duration generally pointing to a stronger retail market. The Average Days to Sell in April did improve compared with March, down from 48.7 days to 47.3 days, although the improvement may not be as great as some may have been expecting. However, with all of the recent restrictions, many cars may inevitably have been in stock for longer than would be desirable in a “normal” market.
The opening up of retail sites and the rise in demand is giving many retailers a confidence boost, so the practice of trading out overage stock added to the jump in retail sales will result in a bigger stock day improvement in May.
Outlook
Early indications for May are that the used car auction market is continuing to improve. Strong demand is continuing to drive values up, and whilst this is undoubtedly good news, dealers should be cautious. With many retailers topping up their sites to pre-lockdown stock levels whilst also keeping up with the increased demand, values may over recover. Supply into the auction market is also improving, so whilst May is shaping up to be a strong month for both auction and retail, the growth in auction values may slow towards the end of the month.