Healthy used car market could deteriorate in Q4, warns VRA

The current “healthy” used car market could deteriorate rapidly in Q4 thanks to a combination of emerging issues, the Vehicle Remarketing Association (VRA) is warning.

Marcus Blakemore, chair of the trade body’s industry trends sub committee, said the impact of the Budget on October 30, falling consumer confidence and larger defleet volumes were all risk factors.

He explained: “What we’re seeing at the moment is quite a healthy used car market. At the wholesale level, demand and supply seem to be evenly matched, prices are strong and all of the key indicators are largely positive.

“This is not to say there aren’t problems including, at a retail level, where there are some concerns among dealers about unit profitability due to an unwillingness to increase prices but generally, the mood is positive.”

However, he added that there was a feeling across the trade that the market could change quickly in a matter of weeks rather than months.

“At the most recent meeting of our committee, there were widespread worries around consumer confidence,” he said.

“The Government has spent a lot of time warning that there are hard times ahead and tax rises are widely expected in the Budget. This could dramatically reduce the propensity for people to make major purchases such as cars.”

At the same time, he explained that there are larger defleet volumes quickly coming down the line meaning that the market could tip into oversupply, putting pressure on values and prices.

“It’s not quite a perfect storm but there is potential for the current, relatively upbeat situation to change before the end of the year,” he said.

The higher volume of vehicles beginning to enter the market would also include an increased proportion of electric vehicles (EVs), about which dealers and consumers continued to be wary.

“When talking about the EV sector, it’s important to caveat that uptake of EVs continues to rise quickly, and that the market now appears stable, certainly compared to the convulsions of the last couple of years,” he added. “Some dealers are now having a relatively good time selling EVs.

“Despite this, we continue to hear concerns from some independent dealers about EV volumes.

“They are aware that stock availability of petrol and diesel is already starting to decline thanks to company car buying trends and the ZEV Mandate.

“They feel neither they nor their customers are prepared for electrification.

“Really, it seems that more needs to be done to support these dealers through this process, helping them identify which EV models are most suitable for their audience and how to provide an educational sales process that helps consumers find the EV and the charging solution that meets their needs.

“This is something that we are discussing within the VRA, building on our recent range of EV remarketing white papers.”

However, he says that there remains a possibility that the positive market could continue into Q4.

He concluded: “While there are an unusually high number of risk factors present, it is not inconceivable that the Government has overmanaged negative expectations of the Budget and that once the new measures are announced by the Chancellor on October 30, consumers feel relatively positive and soak up increased stock volumes.”