Why used car prices will fall

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If you’re in the market for a used car in 2021, then here’s some good news for you. According to new market analysis published Cap HPI – the people who provide car and van valuations for the motor trade as a whole – secondhand car prices are set to fall in the second half of 2021.

This might be not-so-good news for anyone planning on selling – it’s a case of do it sooner rather than later, as the Cap HPI report suggests that used car values could fall by as much as 10% from the middle of 2021. If you’re in the market to sell, it’s never been so important to know what your car’s worth to get the best, fairest deal for your motor. There’s a variety of sites that allow you to value your car online – for instance, Parkers.co.uk: Value My Car.

The reason for the anticipated fall in values comes down to how the market readjusts to the effects of increasing unemployment in the aftermath of the Coronavirus (COVID-19) pandemic. Although the government furlough scheme and other initiatives have maintained many jobs that might otherwise have been lost, these will gradually disappear in the coming months.

The organisation, which closely monitors the used market, and which supplies car valuations to much of the trade says that it’s not all bad news, though. If you’re selling an excellent condition or low mileage car – which is known as a ‘cap clean’ car, demand from buyers is strong as supply of the best examples of all models is more limited than usual. Cap HPI says that 90% of used valuations are for ‘Cap clean’, which is a 6% drop over the normal levels.

Car dealers are reluctant to discount yet more mainstream models, though, and reports that sticker prices remain fairly static and are holding firm in the short term, despite worries over the economy. This is going to happen as used valuations were down 2.8% on average at the end of 2020 – the good news is that if you sell a luxury vehicle or SUV, valuations are resisting this fall.

Another area weathering the storm well are small city cars. They are down overall but are up 10% on used values compared to the same period in 2019. And surprisingly, given the tax advantages and how in vogue they are in new cars sales, plug-in hybrid valuations are down, with Cap HPI saying that used car buyers are still not keen on paying the extra premiums. This is also the case with larger MPV people carriers as family buyers increasingly turn to more lifestyle oriented SUV models instead.

The overall picture is negative for sellers – and look set to become more negative throughout 2021. Valuations have been generally down by 5% during the latter half of 2020, and Cap HPI says that this trend has nothing to do with lockdown. Prices were generally inflated going into the summer and this is an expected re-alignment back to where they should be.

What’s the takeaway for you?

The used car market isn’t in turmoil yet and won’t be any time soon. But there is a downward trend in prices coming up and it’s worth taking this into account when it comes to buying your next car in 2021. Cap HPI’s overall prediction is that used car valuations will deflate heavily in the first half of 2021 by about 10% then followed by a minor recovery into 2022. Interestingly, it’s also predicting that demand will outstrip supplies of late-model and approved-used cars well into 2021.