Used car prices post lock down

[Ceramicolive]

I had been looking for a fun car to add to the stable but with recent events I've had a rethink, maybe buying a car now it isn't the best move with the mother and father of recessions around the corner, If this recession is going to be as bad as the economists predict there will likely be some very good deals on cars to be had in the coming 6 months or so for cash buyers as the market inevitably slows down. You could bag a great car for significantly less if you keep your powder dry for the time being.

As a quantifier the financial times ran an article which stated during the 2008 crash GDP was down to - 8% and their study showed that it was predicted by leading economists that this crash could fall as low as -35%. Scary.

Scaremongering? Who knows but it's certainly food for thought I would say. Any thoughts?

 

[Dryce]

The car market ni the UK is driven by finance.

If finance dries up then new cars become more expensive to acquire - higher monthlies.

Fewer new cars means fewer used cars downstream.

So logically used car prices should drop in a recession - but the structure of the car market means that logic isn't guaranteed.

 

[Dippo]

There is a suggestion that all may not be well at Hertz - quite understandable when you look at the airlines which are one of their main sources of customers. This article from Automotive Week talks about the possible effects in the USA, but there could be similar upheaval in the UK if the whole Hertz fleet were to be liquidated.

https://www.autoweek.com/news/industry-news/a32416014/hertz-bankruptcy-would-flood-used-car-market/

 

[Ceramicolive]

Coupled with people handing back cars they have defaulted on due to lost jobs and recession adds up to a saturated used car market and fewer people wanting or in a position to buy anything. Rocky times ahead for the car industry, it was already in bad shape before all this, in no small part they have brought it on themselves with the ease of finance and keeping the used prices high. It will be interesting to see what happens in the next 6 to 12 months.

 

[Teego]

I suspect the small independents will be the first to show the strain. One of my locals has some very expensive stock which he'll have to turn into cash soon. Unless he has almost 0% stock financing arrangements.

 

[gaz_l]

There is a suggestion that all may not be well at Hertz - quite understandable when you look at the airlines which are one of their main sources of customers. This article from Automotive Week talks about the possible effects in the USA, but there could be similar upheaval in the UK if the whole Hertz fleet were to be liquidated.

https://www.autoweek.com/news/industry-news/a32416014/hertz-bankruptcy-would-flood-used-car-market/

Bad news if a company the size of Hertz might go belly up. The article is obviously written from a US perspective, but if it goes worldwide then that’s a lot of cars flooding the market - and who’s going to be buying replacements? I don’t what percentage of new cars are sold into the rental fleets, but it’s going to make life even harder on the manufacturers if they lose that segment and can’t sell to the private sector who are too busy buying up nearly new motors as a result.

Cheers,

Gaz

 

[Jukie]

The slight relaxing of the rules in England may mean people who can afford a change of car and want to may now make the effort to travel to view cars, be that near or far.

It may also lead to more cars being advertised for sale. It's been understandably stagnant for the last couple of months.

 

[219]

The car market ni the UK is driven by finance.

If finance dries up then new cars become more expensive to acquire - higher monthlies.

Fewer new cars means fewer used cars downstream.

So logically used car prices should drop in a recession - but the structure of the car market means that logic isn't guaranteed.

I think , more simply , that there are going to be a lot of businesses struggling to stay afloat , a lot of employees are going to struggle even if they still have jobs , due to business slowing down in general .

When people have to raise cash to make ends meet , items like 2nd or 3rd cars , hobby cars , motorbikes etc are going to be amongst the first things to be sold off , and in a slow economy the prices are going to be low with only a small number of people in a position to buy such items .

 

[219]

Coupled with people handing back cars they have defaulted on due to lost jobs and recession adds up to a saturated used car market and fewer people wanting or in a position to buy anything. Rocky times ahead for the car industry, it was already in bad shape before all this, in no small part they have brought it on themselves with the ease of finance and keeping the used prices high. It will be interesting to see what happens in the next 6 to 12 months.

The obvious thing is for manufacturers to stop churning out new cars the world can’t afford to pay for .
There are already more than enough cars in the world to meet everyone’s needs .
No one actually NEEDS a new car , unless their old one is broken .

 

[zipdip]

Well I have the money waiting for that nearly new W222 S Mercedes,when the price gets to £15 grand,as long as it is fully loaded.

 

[Ceramicolive]

Well I have the money waiting for that nearly new W222 S Mercedes,when the price gets to £15 grand,as long as it is fully loaded.

Well depending on how bad the crash will be you may be in luck, in 2008 the average car dropped 21% of its market value, given that this crash is currently predicted to be at the least twice as bad or at the worst four times as bad as the crash in 2008 you might not be that far away from the car you want.

 

[Bellow]

I suspect there will be a lot of cars that have not taken kindly to being sat idle for months on end. The cost of repairs may push their owners toward replacement. That may help what will likely (for reasons already covered) be a depressed market.

 

[190]

Cars can sit idle on a used car lot for months and then be buy them. The one part likely to suffer will be the battery as I doubt they go around charging them up until someone wants a test drive and then it will be a fast boost which is not ideal.

 

[Bobby Dazzler]

I suspect there will be a lot of cars that have not taken kindly to being sat idle for months on end. The cost of repairs may push their owners toward replacement. That may help what will likely (for reasons already covered) be a depressed market.

I agree, I don’t think cars don’t like standing idle, especially modern cars. I wouldn’t be surprised if data would confirm that there are more failures after a period of inactivity, although I doubt it’s ever captured in a sufficiently robust way.

 

[Dippo]

A European article on residual values from Automotive Management:

Ageing stock drives European used car retailers’ COVID-19 lockdown losses

Aging stock has been cited as the “main driver” of £1.6 billion losses incurred by Europe’s used car retail sector between the start of the COVID-19 coronavrius lockdown and mid-April.

www.am-online.com

 

[Deleted member 149005]

Buy what you like, and afford, enjoy it and accept that whatever happens, it will almost certainly be worth a lot less in 2, 3, 5, 10 years time

 

[Deleted member 126251]

The car market ni the UK is driven by finance.

If finance dries up then new cars become more expensive to acquire - higher monthlies.

Fewer new cars means fewer used cars downstream.

So logically used car prices should drop in a recession - but the structure of the car market means that logic isn't guaranteed.

What about all the financed cars (new and used) that get returned because people can no longer afford them?

 

[st13phil]

I agree, I don’t think cars don’t like standing idle, especially modern cars. I wouldn’t be surprised if data would confirm that there are more failures after a period of inactivity

Batteries that become deeply discharged can be, and are, an issue with used cars. Not unusual for them to fail fairly quickly after the car is eventually purchased and be replaced under warranty.

The other one is aircon compressor seals, as they are more prone to fail after long periods of non-use.

Finally, be thankful that we don't (yet) have high levels of bio-ethanol in our fuels. That causes huge problems in fuel systems of some vehicles unused for long periods due to its hygroscopic nature.

 

[Bellow]

Add flat/mis-shaped tyres, seized brakes and clutch plates, stale fuel, broken wiper mechanisms as the wipers are sun welded to the screen, etc, etc. Recommissioning the UK's cars is going to be a nightmare!

 

[unimog]

I have little sympathy for car rental companies. Since the early 2000's these companies have been bought up by funds and as a regular renter I have seen discounts all but disappear and costs quadruple in the last 10 years. In days gone by when major manufacturers owned the major renters (GM=Avis, Ford=Hertz, VW=Europcar, Chrysler= Dollar Thrifty) they had very good control of used car markets, keeping lots of late model low mileage cars on forecourts and factories producing cars. And the cars were clean and generally less than a year old.

My last 3 Europcar rentals I have refused to get in on account of the smell and general cleanliness of the vehicle, one had borderline legal front tyres and this was in a wet January. They also had interstellar mileage and were at least 18 months old. Europcar are also on the ropes as they have been for sale since last November.

That lack of foresight has ultimately come back to bite them. For the second time. They had a similar problem during the GFC, they couldn't access funding to buy new stock so the value of the company sank as the fleet aged and costs went up. The abundance of older stock arriving to the used market help push prices down, hence why BCA and other investors then moved to capitalise on buying general public's used cars through WBAC and the like at knock down prices which doesn't help the market either.

The proliferation of leasing and PCP deals is because this is the only way manufacturers can build a market for new and approved used vehicles and keep control of resale values to some extent. I heard stories in the GFC for example of M5 owners part way through their PCP deals being offered the car for peanuts to terminate early just to get the liability off the finance books.

It would be good for some consumers who don't have cars with any value when trading up, but I don't think many people are going to have free money to take advantage of this.

Its also highly unlikely the 'drive electric' movement will gain any traction for the next 5 years, there is just no money left in the economy and moreover no consumer appetite for it.