Updated: Valuation issues for ‘covid cars’ impacted by supply chain disruption

Cars made during the pandemic, with unusual specifications due to supply chain disruption, are proving difficult to value, according to the Vehicle Remarketing Association (VRA).

Marcus Blakemore, chair of the trade body’s industry trends committee, said that dealers and traders were buying cars expecting them to meet certain equipment and specification levels, then finding key items are missing.

“During the initial stages of the pandemic, there was massive supply chain disruption, especially around availability of microprocessors,” he said.

“As a result, manufacturers improvised on the production line, removing key items just to keep things moving.”

Blakemore explained that depending on the manufacturer and model, there are all kinds of items omitted, including heated seats, head up displays, electric door mirrors and electric seats.

“Some cars were even built with analogue instrument clusters and clocks,” he added.

Currently, the remarketing sector is trying to grapple with how much this matters to the valuation of a car and how the impact varies from model to model.

“We’re now in a phase where these cars are starting to leave their initial owners and come onto the used market, and are causing valuation issues among vendors, dealers and consumers,” said Blakemore.

“There is generally agreement in the used sector that few items of equipment add much value to any used car. However, if there is equipment that buyers are expecting missing, it does make a vehicle more difficult to sell.”

For example, he explains that trying to retail a prestige car at three years old that does not have heated seats is probably going to stick around on a stock list for a while.

“So much stock is bought ‘blind’ by dealers and traders in 2024, most don’t realise they have bought a Covid car of this type until it arrives and starts going through their inspection process,” Blakemore continued.

“The question is what to do at that point? Is the buyer able to request some kind of discount? Should they return the car? Can the specification problem be resolved?”

Further confusion, according to Blakemore, was caused by the fact that little data was available about these cars, with few manufacturers having kept detailed records covering the ways in which cars were impacted.

“We’ve had conversations with franchise dealers who have looked at their databases and insisted that models with certain specifications just can’t exist, when we’ve had the car in front of us,” he said.

“These kinds of gaps mean the valuation companies can’t access reliable date. Even in situations where a vehicle is sold and clearly marked as having a compromised specification, there is little guidance available on what it is worth.”

He added: “There are no easy answers to the questions that these vehicles raise but we are highlighting the fact this is happening in the hope that we can at least promote some dialogue.

“At present, this is a relatively small but annoying problem but as more of these cars enter the remarketing cycle, it’ll become more of an issue.”

Dylan Setterfield, head of forecast strategy at Cap HPI, explained that during the pandemic and semiconductor supply issues, its new vehicle data team was being asked questions every day by manufacturers about creating IDs with revised or reduced specifications.

He said: “In some cases, items were changed to an older/smaller/less premium version of the existing equipment. In other cases, specification items were removed altogether.

“On each occasion, a decision was made as to whether the requested change would be likely to have an impact on the valuation of the vehicle (positive or negative) and in these cases, new cap IDs were created.

“In these scenarios, the situation is relatively uncomplicated; if there is a valuation difference between the two specification levels then they will be valued via individual Cap IDs, provided they were correctly registered.”

However, Setterfield said that there were also a number of cases where manufacturers introduced multiple versions of the same trim with subtle variations in the name, such as ‘Trim Edition’, ‘Trim Nav’, ‘Trim X’, ‘Trim Design’, etc (where “Trim” is the original model trim name).

“It is in these cases where more care needs to be taken as vehicles which sound very similar can have quite different levels of specification,” he explained.

“For some vehicles which were only available for a short period of time, it appears that manufacturers may not have kept detailed records regarding exactly the ways in which all cars were decontented, but Cap HPI products will still display complete specification detail, either via registration lookup or within new vehicle data and provenance information such as HPI Spec Check.”