October used car stock levels and sales grow, but the trend of short supply and rising prices is coming to end reveals INDICATA report insights
Used car sales in the UK grew by 5.7% in October aided by a 7.4% month-on-month growth in stock levels according to the latest INDICATA market insights report.
However, just as more used stock has been coming into the market and dealers have been filling their forecourts again Lockdown 2.0 has immediately shut showrooms and slowed consumer demand.
As Covid infection levels rise the current used car market dynamic of short supply and rising prices is coming to an end warns Jon Mitchell, INDICATA group sales director.
“The supply shortage has contributed to higher prices at a time when traditionally the used car market is slowing down. As supply improves, we are starting to see that trend reverse with prices starting to soften,” he said.
“With Lockdown 2.0 firmly in place for November limiting the market to online sales, and December typically a dead month, dealers should be prepared to manage an overstocking issue on the back of reduced demand.
“We would recommend using tools like INDICATA to immediately review prices on a daily basis and make decisions on keeping their best stock for Q1 2021 to cater for the consumers buying used cars online. Importantly any 90-120-day stock should be immediately repriced and sold to tidy up stock portfolios ready for a potential fast start in January,” he added.
Even with stock levels rising, stock turn is still showing a high degree of constraint, with diesel at 8.6 and petrol at 7.9 indicating extreme popularity in the used car market, especially compared to BEVs where despite an 80% increase YoY in sales, stock turn is low at 4.9, a 16% drop over the same month last year.
The lack of OEM tactical action in the new and pre-registration market can clearly be seen by the 41% drop in sales in October (-43% compared with September). But the 15% increase in stock turn for sub 12-month old cars shows there is pent-up demand for the limited supply available.
Sales rates and stock turn for the fleet, leasing and PCP market supplied 2-3-year old used cars remains flat. This could indicate a future challenge as many finance companies have been providing customers with contract extensions which will result in increased used supply next year.
“With the speed of market change governed by Covid-19 dealers should be considering prepared to review stock on a daily basis and make tactical pricing decisions accordingly. Online selling will ensure dealers shift some used cars during Lockdown 2.0 but only by using data, insights and keeping their finger on the local and national pulse will they ensure their used car businesses are in the best shape moving into 2021,” said Mitchell.
