Prices are expected to remain stable in the short to medium term, while a downwards trajectory is inevitable in the longer term.  -  Photo: Cox Automotive

Prices are expected to remain stable in the short to medium term, while a downwards trajectory is inevitable in the longer term.

Photo: Cox Automotive

Despite signs of an end to significant rises in used vehicle values, the lack of new available stock means an imminent drop in pricing is unlikely, according to data compiled by Cox Automotive, a global remarketing, funding, retail and mobility solutions provider. 

The data is compiled in the company’s latest AutoFocus quarterly insight roundout. The analysis outlines a range of scenarios to predict the best, middle-, and worst-case outcomes for the used vehicle market based on current market data. 

Philip Nothard, Insight and Strategy Director, Cox Automotive, said a 31 million shortfall in new vehicles over the past two years will cause supply constraints within the used car market.  -  Photo: Nothard

Philip Nothard, Insight and Strategy Director, Cox Automotive, said a 31 million shortfall in new vehicles over the past two years will cause supply constraints within the used car market.

Photo: Nothard

Philip Nothard, Insight and Strategy Director, Cox Automotive, said a 31 million shortfall in new vehicles over the past two years will cause supply constraints within the used car market.

“While the sector has become accustomed to fewer vehicles and higher prices, the full extent of the global new vehicle shortfall will have a significant effect in the coming months,” he explained.

The top five European markets registered 6.5 million fewer vehicles in 2020 and 2021 compared to the previous two years. As the used market depends on new vehicles to push stock through, further pressures are inevitable. 

“Challenges exist mostly in the zero to six, and sub-12-month market, although we will soon see more of the same within the one-to-three-year sector, particularly over the next 24 months. Eventually, shortages will trickle down to the late three-year and five-year market,” said Norhard.

While used vehicle values indicate a realignment in wholesale and retail markets, the lack of new vehicles means “they are not about to fall off a cliff edge,” Norhard said. 

Retailers are receiving stiff competition for product from new competitors who adjusted their stock profile during the pandemic, for example, daily rental companies that turned to the used market to compensate for the lack of new vehicles. Prices are expected to remain stable in the short to medium term, while a downwards trajectory is inevitable in the longer term. 

In a resilient used vehicle market, retailers are seeking profit from new avenues, said Norhard.

“Most retailers have seen remarkable profits during the past few months from increased margins, full retail prices for new vehicles, minimal discounts, and a lack of targets – a dynamic the industry has not seen for a while. While supply and demand challenges still exist, many retailers display innovation and inventiveness to position them strongly against several headwinds.”

Norhard does not anticipate values for the majority of sub-sectors to return to pre-pandemic levels for several years, if at all. “Therefore, while current pricing conditions remain, and stock supply remains low for many manufacturers, it is more important than ever for retailers to grasp supply dynamics at a model and derivative level,” he advised.

The full AutoFocus analysis is available on the Cox Automotive site.

About the author
Cindy Brauer

Cindy Brauer

Former Managing Editor

Cindy Brauer is a former managing editor for Bobit Business Media’s AutoGroup. A native of Chicago but resident of Southern California since her teens, Brauer studied journalism and earned a communications degree at California State University Fullerton. Over her career, she has written and edited content for a variety of publishing venues in a disparate range of fields.

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