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One of the biggest step-changes in vehicle remarketing happened in 2020 as a result of COVID-19. To keep the used car market moving throughout lockdown, auction companies switched to an online-only sales model. Whilst nothing new for some companies in the sector, for most auctions, online business only accounted for a part of their sales. Whilst online buyer numbers have grown in recent years, full engagement was not predicted in the short term, with a significant hardcore of buyers still preferring to attend physically so they could touch and personally inspect the stock on offer for themselves.
The result was surprising, strong online buyer engagement from the start. This grew quickly to the point where some auction groups are not planning to recommence physical auctions, as online-only has proved so successful. In the current climate with the COVID-19 pandemic dominating the way we live our lives, it is perhaps understandable that buyers will not want to mix with others in auction halls. Additionally many have seen the benefit of being able to access multiple sales across the country on the same day, increasing the pool of stock they can choose from, rather than committing to attend one physical site. Not to mention buyers no longer need to travel and stand in what can be at times very cold auction halls. That said, some auctions will continue to operate traditional physical auctions and these are likely to remain well attended.
The rapid increase in online engagement has also changed the way that trade buyers assess stock condition. No longer able to physically inspect vehicles for themselves, they now rely on photography, condition reports and auction grading. As a result, vehicles with condition issues are easily highlighted, impacting hammer prices.
Many buyers shy away from vehicles towards the higher end of auction grades with condition issues, as it delays the time taken to get them on the forecourt, with grades 4 and 5 often achieving disproportionately lower bids. Most buyers appear content to bid in line with Glass’s trade value for grade 3’s and even more for grade 2 and 1. The question here is the potential opportunity for vendors to refurbish vehicles before a sale, to maximise their returns.
Analysis conducted by Glass’s shows the average price gap between a grade 4 and grade 3 condition car in 2020 was £510 as shown in the chart below, with the gap increasing in the second half of the year once the major auction groups switched to online-only.
The analysis is based on auction observations gathered throughout 2020 but excludes the lockdown months of April and May. Glass’s analysed typical Fleet aged cars between 2.5 and 4.5 years of age. It is clear to see the opportunity is there for vendors to maximise their returns by refurbishing cars from grade 4 to grade 3.
It is also evident that there is an opportunity to turn grade 3’s into grade 2’s, although in 2020 that was more pronounced following the end of Lockdown-1 and throughout the second half of the year. Whereas the gap between grade 4 and 3 is consistent throughout the year. Of course, refurbishment is an investment and costs vendors in terms of money and time. However, it is worth serious consideration as not only does it increase hammer prices it also enhances a vendor’s brand reputation, as buyers become used to improved condition standards being consistently offered.