Used car prices plummet

Used car prices are plummeting, April has seen a huge influx of cars into the market which is creating an oversupply problem and which quite frankly has caught the market completely by surprise.

Of course it hasn’t helped that there are so many holidays in April and that we saw a late surge of trade-ins in late March. In addition rental companies de-fleeting stock in March and April has added to the problems caused by manufacturers chasing targets and pre-registering too many cars meaning the market is overheating and causing a dramatic decline in used car prices.

The auctions are bursting with cars and buyers have choice on an unprecedented scale, meaning that only the most desirable, best in class models are achieving anything like their reserve prices.

It hasn’t helped that ridiculously long lead times have led to dealers pricing customer trade-ins months in advance of them coming into stock and then realising that they have massively overvalued them. So for dealers it is more important than ever that they react to rapidly changing market conditions and for the first time in nearly 2 years accept the fact that there is an abundance of cars for car buyers to choose from and the dealers who get their pricing and presentation right and who manage their stock effectively whilst accepting that margins will be under real pressure will probably steer the ship through the storms while those who are not at their best will probably live to regret it.

Of course it is a double edged sword for buyers. They are more likely to get a great deal on a new or used car from wherever they buy but in all likelihood the price they get on their existing car could vary wildly. In some cases dealers will be reluctant to even take a car as part of any deal as they look to avoid ‘buying’ business at the expense of potentially wiping out profit margins on unsalable trade-ins.

A cash buyer with no trade-in however could be a real winner and shopping around and hunting out the best deals could really help in bagging a very real bargain.

Industry commentators expect this current situation to be a blip with all the negative factors colliding at the same to create a mini crisis. However the long term view is that there are still not likely to be enough cars around and therefore values will decline more steadily once the current situation has eased.

A sales manager we spoke to explained that although this has come out of the blue to a certain extent is a bit of a wakeup call and with reduced trading days due to the amount of holidays it’s going to be harder than ever to achieve budgets.

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