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Coronavirus: Used car values slide

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Used car values have fallen by 2.2% this month as retail and trade demand is affected by the Coronavirus crisis, according to Cap HPI.

There was a dramatic effect on used car prices from March 16 as demand fell.

The number of cars sold on Friday March 20 was 23% lower than on March 6 and 19% lower than on March 13.

On March 23, Cap HPI predicted that values were likely to fall further.

The total cumulative Live movement during March, leading to April’s monthly values, was an average drop of 2.2% (-£275) at the three-year, 60,000-mile point, the majority of which happened in the final 10-days of valuing. For newer used cars, the drop was 1.8% (-£425) at the one-year, 20,000-mile point.

Derren Martin, head of valuations UK at Cap HPI, said: “As you would expect, all of the main sectors have been affected by this decrease in values. Rest assured, the movements that have been made in March have been reflective and not an over-reaction to feedback or industry ‘noise’. We are aware of reductions by some online car purchasing sites and some remarketers, but our adjustments have been purely as a result of used car transactional data.”

Cap HPI expects that in the short-term both used and new car sold volumes will reduce dramatically, as the industry has already witnessed in the immediate aftermath of the country lockdown.

BCA has closed all its physical auctions, now only selling cars online. It states that customers can come and collect vehicles, or have them delivered, despite the Government advising against any non-essential journeys.

Manheim, meanwhile, has paused all auction activity until the lockdown period is over. It has said it will not charge buyers for storage for vehicles remaining on site during this time.

Martin added “We will be analysing the data as always, but not adjusting used values while there is insufficient data. In effect, if vehicles are not selling in quantities anywhere close to normal, we will not be adjusting. No overall market adjustments will be made based on historical data or opinion; outliers and unrepresentative sample sizes will not be reflected. We will be closely tracking retail volumes and prices, but not adjusting any trade values from these.

“We feel this is the sensible approach in these unprecedented times – we always have a duty to reflect the market, but at present, there is not enough of a market to do so accurately.”

Analysts at Cap HPI believe when the car industry does return to anywhere close to normality, there is the likelihood of some pent-up demand, and a shortage of new cars, both which could well be positive for prices of used cars.

Short-term valuation forecasts are predicting no change to values in the next three months.

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  • Phil Weaver - 27/03/2020 12:16

    As an independent motor dealer our biggest fear financially is used car depreciation during these unprecedented times. Simply put, freeze the market pricing from March. Unprecedented times = Unprecedented action.

  • Devon Guy - 02/04/2020 16:18

    The used car market, pre virus, was overinflated in price and unsustainable. This was argued to be reflective of the big price increases within the new car market introduced over the last 2-3 years as applied by manufacturers to compensate for EU fines (as previously reported in Fleet news). Sadly, over the coming months and years the economy is going to look radically different, with a global recession and high unemployment levels looking like a real possibility. Therefore we are going to see both the new and used car markets face low demand and chronic over supply, which means much reduced forecourt prices. I have a friend that runs a small used car business. He used to offer “cash for cars”, maybe getting 3 calls a week, pre the virus. He’s now averaging 30-40 calls every week from desperate owners wanting to offload their cars because they have already lost their jobs. This comprises the newly made unemployed, and those with no work on zero hour contracts and the self-employed all who urgently need cash. He hasn’t sold a car in 12 weeks and when he tells them he can’t take on any new stock, a tirade of abuse follows! Although we have had lockdown for a few weeks, it’s difficult to assess what demand will be like for used cars given the above. Consequently everyone is nervous about what the market will look when lockdown is relaxed. I predict a 30% price reduction will be required to get the market moving again. Add to this, many companies have recognised that their employees can safely and cheaply work at home, very soon many of the new home workers will realise 2nd cars will no longer been needed. A recent newspaper indicated as many as 3m employees could be permanently working at home. So we'll see yet more oversupply and price reduction. On the positive, looks like we are going to meet the carbon reduction target faster than predicted (who could have predicted that last year!) and I believe the government need to re-introduce scrappage, maybe for diesel cars over 5 yrs old and remove permanently BIK from Electric and hybrid company cars for 5 years to stimulate new car demand.

  • Kenneth Doak - 10/04/2020 21:36

    Hi, I am thinking of buying my 17 yr old son a car from Reg Vardy. They say that the prices won’t go down after Covid19. What is your thoughts on this. Kenny

    • Devon Guy - 15/04/2020 13:08

      Hi Kenny All sales execs will be instructed to say this right now. If they could predict such things with 100% certainty, and based upon the current economic data available, they'd be in a highly paid city job (but they aren't....!!!). If you need the car for your son urgently, make a silly offer, maybe up to 20% less as a "first and final offer" and use the proceeds towards the big insurance bill !. If they aren't keen, go to the next dealer and do the same. The ones most desperate for the cashflow will accept. Otherwise, if you can wait, there could be bigger discounts the other side of this as the prices tumble.

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