Used car market, what's going on?
Discussion
I know that used cars are expensive and have been for a while, but am trying to figure out whether to hold off buying one for a few months or not. I sold my last car at the start of December last year and had a look around for a replacement for around the £20K mark, something like a 5-10 year old Mercedes. I test drove a couple and had 10 that matched my requirements (all from dealers) in my Autotrader "watch" list, but it was by then nearly the middle of December and as I can use my wife's car and also have a van for work, I decided to hold off until the new year. Just before I sold my car I was chatting to the DP at the local Lexus dealer, where my wife's car was in for some warranty work. He was pretty firm in his opinion that I should sell my car pronto as he felt the market was in for an imminent sharp correction downwards (my old car was a newish BMW). Anyway, I thanked him for his advice and did take it.
So fast forward to today and I thought I'd start looking again as not having a second car in the family is becoming a bit of a nuisance.
I was surprised to see that every single car that I'd test driven, or had put on my watch list, was still for sale. None have shifted in 6 weeks +. All are on at the same price as far as I can remember. That's 12 out of 12 cars that haven't sold in what's meant to be a sellers market?
So, what's going on? Just coincidence, or am I going to lose even more money than normal if I buy now?
So fast forward to today and I thought I'd start looking again as not having a second car in the family is becoming a bit of a nuisance.
I was surprised to see that every single car that I'd test driven, or had put on my watch list, was still for sale. None have shifted in 6 weeks +. All are on at the same price as far as I can remember. That's 12 out of 12 cars that haven't sold in what's meant to be a sellers market?
So, what's going on? Just coincidence, or am I going to lose even more money than normal if I buy now?
If you're talking about a market as a whole then everything rises and falls together. So if you bought a car now. Kept it for 12 months and lost £1000 in depreciation and downward market fluctuation when you sold it all the other cars you might change it for will have changed price similarly.
So really you'd be no better or worse off assuming the reason you're worrying about the value of any car you have is that you want to carry forward to the next purchase.
So really you'd be no better or worse off assuming the reason you're worrying about the value of any car you have is that you want to carry forward to the next purchase.
If this was about investment it would make a difference but buying and selling family sheds is the same as buying houses even when cars generally go down in price while houses generally go up in price. If you're changing one car for another all will remain relatively equal regardless to timing. So when you buy and sell you're buying and selling at the same price as everybody else all things being equal.
If you're thinking about selling a car and holding onto the money waiting for the market to improve in your direction you may be better off investing the money rather than holding it in a bank account. If we have 5% inflation this year what you put in the bank in January... ect, ect... You'd have to be a real top class investor to beat those odds so may as well just buy a car now if you want one.
If you're thinking about selling a car and holding onto the money waiting for the market to improve in your direction you may be better off investing the money rather than holding it in a bank account. If we have 5% inflation this year what you put in the bank in January... ect, ect... You'd have to be a real top class investor to beat those odds so may as well just buy a car now if you want one.
ingenieur said:
I wonder how much of it is connected with the recent popularisation of PCP financing? I think that way of buying a car has gone from 'not that common' to 'loads of people doing it' in a relatively short period of time?
This has definitely played a part. Just looking at a CarBuyer article from Nov 2020, with the key stats being:- In 2010, c. 60% of new car sales were on finance
- In 2020, c. 90% of new car sales were on finance
- In 2019, 75% of the car finance market was PCP
I'd liken it in some ways to the property market. Record low interest rates on mortgages has enabled house prices to stay at, and continue to grow to, record high levels. Similarly, changing approaches to car buying has allowed people to buy vehicles that would previously have been out of reach, and has allowed car manufacturers to bump up prices well above inflation. When I was a kid, if someone had a BMW 3-series, people would have been amazed. It would have turned heads. Now it's a run of the mill, fairly common sight, despite being more expensive than ever.
As for used prices, its definitely a supply and demand issue just now IMO. I do expect a correction eventually, but whether it ever gets back to how it was pre-Covid or not is anyone's guess.
lol64 said:
So, what's going on? Just coincidence, or am I going to lose even more money than normal if I buy now?
I think you will definately lose even more than normal as used car prices are very high now and I don't think they will get any higher, therefore it can only go down. It's a matter of how much longer they will stay high and this will ultimately be driven by demand for used cars and also the supply of new cars to feed used market. Also will we be seeing heavy discounted new cars to see people buying/leasing new over old. What I do believe is if you're looking at 5-10 year old cars, these car would have depreciated a considerable amount from their price when new, but also because of the age I think these would be less desireable at some point, therefore finding buyers would be difficult. I'm not sure what cars you are looking at but a 5-10 year old Merc for 20k... depending on model 5 years would be fine but 10 years this would have to be some very special Merc (AMG C63/E3 etc) for me to pay 20k. Everyone's appetite for risk is different but personally I try to avoid cars older than 7 years old just because it's a matter of time a big bill lands and you have to think when you sell it on how many would want one.
Ultimately, if you need a car right now then you have no choice but to pay the high used prices. If you can hold out, unless it was like 12-24 months, I think the prices won't differ much either. Look at the waiting list for some cars, easily 18 months, and it will take some time before they feed into the used market.
Pierre2k said:
This has definitely played a part. Just looking at a CarBuyer article from Nov 2020, with the key stats being:
- In 2010, c. 60% of new car sales were on finance
- In 2020, c. 90% of new car sales were on finance
- In 2019, 75% of the car finance market was PCP
I'd liken it in some ways to the property market. Record low interest rates on mortgages has enabled house prices to stay at, and continue to grow to, record high levels. Similarly, changing approaches to car buying has allowed people to buy vehicles that would previously have been out of reach, and has allowed car manufacturers to bump up prices well above inflation. When I was a kid, if someone had a BMW 3-series, people would have been amazed. It would have turned heads. Now it's a run of the mill, fairly common sight, despite being more expensive than ever.
As for used prices, its definitely a supply and demand issue just now IMO. I do expect a correction eventually, but whether it ever gets back to how it was pre-Covid or not is anyone's guess.
Interesting stats there. In 2010 if c.60% of new car sales were on finance, that would mean the remaining 40% would have been cash or maybe not finance with the manufacturer, i.e. a personal bank loan. Either way, I think the conclusion is more are PCP or what I would simply class as leasing. I agree PCP and other forms of leases like PCH has allowed people in recent years to get into new cars like BMWs at affordable prices whereas this was not available in the past when we were kids. Along with heavy discounts, this has allowed many in recent times to "rent" cars from the luxury brands. How many people do you know that have paid off their BMW or Merc PCP balloon payment? I hardly know anyone. - In 2010, c. 60% of new car sales were on finance
- In 2020, c. 90% of new car sales were on finance
- In 2019, 75% of the car finance market was PCP
I'd liken it in some ways to the property market. Record low interest rates on mortgages has enabled house prices to stay at, and continue to grow to, record high levels. Similarly, changing approaches to car buying has allowed people to buy vehicles that would previously have been out of reach, and has allowed car manufacturers to bump up prices well above inflation. When I was a kid, if someone had a BMW 3-series, people would have been amazed. It would have turned heads. Now it's a run of the mill, fairly common sight, despite being more expensive than ever.
As for used prices, its definitely a supply and demand issue just now IMO. I do expect a correction eventually, but whether it ever gets back to how it was pre-Covid or not is anyone's guess.
The capital cost of a car is becoming less significant as we rapidly move towards a subscriptive economy it is all about the 'mumflies' ££ no different essentially to renting your i phone etc.
UK cars both new and used have been too cheap for too long and over supply especially to the fleets has typically resulted in huge discounts but no more.
High used car prices will be with us for some considerable time yet due to all the well known issues. Many cars have appreciated between 25 and 50 percent in the last year and whilst the festive period has typically shown slight slowing there are signs of rising prices once more not least due to inflation and most experts consider this will continue through most of this year at least.
UK cars both new and used have been too cheap for too long and over supply especially to the fleets has typically resulted in huge discounts but no more.
High used car prices will be with us for some considerable time yet due to all the well known issues. Many cars have appreciated between 25 and 50 percent in the last year and whilst the festive period has typically shown slight slowing there are signs of rising prices once more not least due to inflation and most experts consider this will continue through most of this year at least.
f1racer said:
lol64 said:
So, what's going on? Just coincidence, or am I going to lose even more money than normal if I buy now?
I think you will definately lose even more than normal as used car prices are very high now and I don't think they will get any higher, therefore it can only go down. It's a matter of how much longer they will stay high and this will ultimately be driven by demand for used cars and also the supply of new cars to feed used market. Also will we be seeing heavy discounted new cars to see people buying/leasing new over old. What I do believe is if you're looking at 5-10 year old cars, these car would have depreciated a considerable amount from their price when new, but also because of the age I think these would be less desireable at some point, therefore finding buyers would be difficult. I'm not sure what cars you are looking at but a 5-10 year old Merc for 20k... depending on model 5 years would be fine but 10 years this would have to be some very special Merc (AMG C63/E3 etc) for me to pay 20k. Everyone's appetite for risk is different but personally I try to avoid cars older than 7 years old just because it's a matter of time a big bill lands and you have to think when you sell it on how many would want one.
Ultimately, if you need a car right now then you have no choice but to pay the high used prices. If you can hold out, unless it was like 12-24 months, I think the prices won't differ much either. Look at the waiting list for some cars, easily 18 months, and it will take some time before they feed into the used market.
I would speculate that now the Bank of England is halfway to admitting that inflation is not transitory but will be here to the end of next year at least. This is their way of saying they are going to raise interest rates and probably more frequently than they originally planned.
As families see inflation and interest rates start to rise even more then they will cut back on their spending. What we have seen is chip shortages which is keeping new car prices high. Some people have decided to go for nearly new cars instead. This has driven up that market.
However, as people find their spending a bit tighter then they will start to look for older cars rather than nearly new. So we will see around 5 year old cars holding on to their prices for another year or two.
ingenieur said:
When I was a kid, if someone had a BMW 3-series, people would have been amazed. It would have turned heads. Now it's a run of the mill, fairly common sight, despite being more expensive than ever.
I don't think that's true. Here's a recent article from Australia demonstrating that current car prices are historically very low:
https://www.carsguide.com.au/car-news/rip-off-are-...
It compares a current 330i with historic inflation-adjusted prices for a 325i, in Australian dollars:
2021: $77,605
2006: $105,300
1986: $128,000
Although these figures are for Australia, I reckon the trend in the UK would be similar.
At least in Australia, cars such as a 3 series have become a much more common sight because they're hugely more affordable now than they were a few decades ago.
Edited by David-p5d5m on Monday 24th January 07:15
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