COVID-19 IMPACT ON CAR VALUES
If you are thinking about buying or selling a used car over the next few weeks, you could be concerned about the market and its impact on car values. Used car values are influenced by a wide range of factors with supply and demand as the key drivers. Our experts examine data from across the wholesale and retail markets to ensure that vehicles reflect the market in real-time. You can value your car at hpivaluations.com The good news is that 2020 got off to a strong start and February was the strongest month for used values since 2012. So, whilst values have dropped since then, year-to-date in total they have held up reasonably well. New Car Sales The new market influences the used market and often when the new market shrinks, it can restrict the supply of vehicles into the used market which drives prices up. Official registration statistics reported that February 2020 ended 2.9% down on the same month last year, with 79,594 cars registered compared to 81,969, which means the market was down 5.8%. Private sales have been the most affected, down 11.7% year-to-date, driven by weak consumer confidence which preceded the COVID-19 pandemic. Demand for diesel cars fell again, and this is already down 25% year-to-date, with petrol cars down 5%. Mild hybrid vehicles are included in both of these figures. Alternatively-fuelled cars continue to grow in popularity, however, with battery electric vehicles (BEV) up 218%, plug-in hybrid vehicles (PHEV) up 88% and hybrid electric vehicles (HEV) up 33.5% for the year so far. Used Car Retail Activity Again, it feels like a long time ago now, but the start of March was buoyant for many car retailers. Carrying on from the previous two months, footfall on the dealer forecourts was healthy as was online activity. Trade values increased by 1.7% on average since the start of January, so the biggest issue for dealers was maintaining their margins as the price motorists pay remained steady. During the first week of March, the shadow of COVID-19 was largely still to appear over retail forecourts, despite the onset of the pandemic in China and Italy. During the second week (commencing 9th of March), the industry began to feel the impact of the pandemic. There was a sea change in the market mid-month, with retail demand affected over the weekend of 14th/15th as the country accelerated in its realisation of the seriousness of the situation. From Monday 16th, when the government introduced daily updates and with the measures to counter the spread of the virus, retail demand took a dramatic downturn. Enquiries and test drive levels dropped to around half where they had been the previous week, and many appointments were cancelled. The situation in the country changed daily from the 16th, with consumer footfall at car retail sites dropping off steadily as the public were urged to limit social contact. The weekend of the 21st/22nd saw further declines, with reports of sales rates down around 60-70% from where they should have been in more normal times. Although these volumes of sales were nowhere near where retailers would have liked, they were still reasonably high considering consumers were being urged to shop for essentials only – obviously, a car purchase would have been seen as this for some. The evening of 23rd March will be remembered by most who witnessed it for years to come. The British Prime Minister, Boris Johnson, announced what amounted to a lockdown, with all non-essential businesses forced to close. This included closure of car showrooms, although many had already taken this action before the decision was taken out of their hands to protect their employees and customers. While online activity remained for many, this lockdown still had an immediate effect on the industry. Despite trade values dropping, results from retail advertised pricing analysis on the 25th March showed there had been no discernible movement. Most retailers realised that reducing prices would not stimulate the market, and consumers are not staying away due to prices but because of other extenuating circumstances. Used Car Values Used values in March were tracking at a -0.3% movement from the previous month by Friday, 13th – reasonably healthy, especially considering values had been going up for the last two months. However, in line with retail and trade demand, there was a dramatic effect on used car prices from Monday, 16th. The overall 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. Our final day of valuing, before we cut off for the monthly product, was the day after the Prime Minister announced non-essential retail sites closing and informing the public to stay at home, so reflecting pricing movements as of Monday 23rd of March. In effect, what this average movement has done is reverse the existing increases from earlier in the year of 1.7%, minus a further 0.5%. As would be expected, all kinds of cars have been affected by this decrease in values. The niche sectors of convertibles and coupe cabriolets, where evidence was lower, have been slightly less affected in percentage terms. What Next? In the short-term, it is clear that both used and new car sold volumes will reduce dramatically – we have already witnessed this in the immediate aftermath of the country lockdown. During this time, we will continue to analyse the data but do predict that prices are unlikely to move until car showrooms are allowed to reopen and the market returns to some semblance of normalcy. The situation does seem to change daily, and we have not yet reached the peak of infections in the UK, so it would be almost irresponsible to predict too much. It is not easy to predict what will happen to the market. Government support will help, but still, these are tough
Convertibles, coupé-cabriolets and supercars that hold their value
In a recent blog we introduced our latest tool which allows you to discover how well (or otherwise) just about any mainstream car retains its value. You can discover what a new car will be worth in three years as well as how much the cars of 2016 will be worth when they reach six years of age in 2022. In that last article we looked at some of the key players within the city car, supermini and small family hatchback segments. Those are the cars that sell in big numbers, but what about some of the more aspirational cars? How do the models that sell in smaller numbers fare, when it comes to losing or retaining value? Convertibles With summer about to hit, we’re going to look at what in theory is one of the most seasonal segments of all – the convertible. Despite the UK’s frequently inclement weather, we buy a lot of open-topped cars; in fact we buy more of them than any other European country. Whereas convertibles used to be noisy and leaky so you had to be an enthusiast to own one, when the roof is up on a modern drop-top it can be as refined and comfortable as a saloon. As a result, year-round use is perfectly possible, which is why values are less seasonal than they used to be. For new cars, at the top of our retained value table is the latest Porsche 911. Incredibly, 19 of the top 20 places are taken by Porsches, with the outgoing and incoming 911s dominating things – although the 718 Boxster also appears several times. The sole top 20 place that isn’t taken by a Porsche is taken by the Bentley Continental GTC in 6.0-litre W12 form. That’s a car that is expected to retain 56.9% of its value, whereas the Fiat 500C at the bottom of the table will be worth just 30.8% of its new list price after three years. However, while the Fiat will shed around £10,000 in that time, the Bentley will go down in value by £70,000 or so. It’s a similar picture where the convertibles of 2016 are concerned; by the time these reach their sixth birthday in 2022 it’s the Porsche 911 and Boxster which will have held their value the best. Again, 19 of the top 20 cars are Porsches with only the Range Rover Evoque 2.0 Si4 HSE Dynamic breaking up the party with an appearance at number 12. At the top of the pile is the limited edition Boxster Spyder which is expected to hold on to 38.7% of its value; at the bottom of the table this compares with the Vauxhall Cascada 2.0 CDTi Elite which is pegged at just 14.4%. The Cascada’s showing reflects how important an aspirational brand is to buyers; we would all prefer to own a car that’s seen as premium rather than mass-market. As a result, eight of the 10 bottom places are taken up by the Vauxhall Cascada, Citroen DS3 or the DS 3. What may be more of a surprise is that the other two slots are taken by the BMW 6 Series convertible in 640d form. Although coming from a premium brand, the 6 Series perhaps never gained the following that BMW wanted, and is no longer in production. However this BMW will be surprisingly affordable in 2022; in 640d SE form we expect it to be worth just 14.6% of its new list price when six years old. Coupé-cabriolets We separate coupé-cabriolets from convertibles with a cloth roof, and what’s interesting is how few drop-tops are now available with a folding hard top. There was a time when convertibles were all going this way, but now there’s just the two-seater Mercedes SLC and the four-seater BMW 4 Series – and the former is about to go out of production. By the end of the summer the only coupé-cabriolet on sale in the UK will be the BMW 4 Series. We expect the Mercedes to hold on to more of its value than the BMW (41.1-44.0% compared with 28.6-35.2%) and if we look at the 2016 coupé-cabriolets the situation is mirrored there, with the Mercedes (which was then called the SLK) and the 4 Series both dominating the top of the table. The only other contender is the Renault Megane, which unsurprisingly trails the two Germans thanks to its lack of a premium badge. Supercars Supercars are generally the most expensive and exclusive cars you can buy; the only models that can compete are ultra-luxury saloons from the likes of Rolls-Royce. As a result, while the Ferrari 488GTB retains more of its new list price than any of its rivals, with a forecast residual value of 64.5% it will still shed over £70,000 within three years. Throughout our supercars table Ferrari is up against Aston Martin and Lamborghini, with the Audi R8 bringing up the rear. It’s interesting that the Audi trails its more prestigious rivals by quite so much; the 5.2 V10 coupé will retain as little as 37.5% of its value whereas the lowest-performing Lamborghini is pegged at 47.7%, while the lowest-performing Aston Martin is rated at 52%. On the Audi’s part it’s certainly not because of any lack of ability as this is one of the best driver’s cars out there – it’s all down to the badge not being as aspirational as those of its rivals. Looking at the supercars of 2016, and what they’ll be worth in 2022, once again it’s Ferrari that leads the table with the top seven places. Lamborghini takes the next seven slots with various iterations of the Aventador and Huracan, with the Audi R8 taking places 15-19. Perhaps the most interesting thing about taking this longer-term view is how much more mixed up things are. Things are very polarised within those first three years, but by the time these supercars have reached their sixth birthday, some versions of the Audi R8 hold on to their
Cars that hold their value: part 2
We love number crunching here at HPI, and we especially love to see how different cars compare when it comes to running costs and depreciation. As we’ve written before, many buyers assume that rival cars cost much the same to run and that they lose value at much the same rate, but nothing could be further from the truth. Working with and presenting data is what we do, and our latest tool allows you to compare depreciation levels of just about any car currently on sale as well as those on sale three years ago. As you can see on our tables and graphs below, not only have we predicted how much value will be lost by each of the mainstream cars currently on sale, when they reach their third birthday in 2022, but we’ve also logged what every car registered in January 2016 will be worth in 2022 when they reach their sixth birthday. The latter takes into account actual depreciation over the past three years and predicted depreciation over the next three years. As you’d expect, it makes fascinating reading. City cars The tool allows you to search by make, model and derivative, or by market segment. With almost 7000 cars in there we’ve covered everything from the very affordable to the very aspirational. For this article we’ll focus on the former and we’ll kick off with the smallest vehicles of all: city cars. At the top of the pile is the Abarth 595 Turismo, a new example is expected to retain an impressive 48.6% of its value over the next three years; and a 2016 example is expect to retain 28.8% of its value by the time it’s six years old. To put the Abarth’s performance into context, at the other end of the spectrum is the Peugeot 108 1.0 Allure which should retain just 31.4% of its value when 3 years old. While this might seem like a rather poor performance, it’s closer to the norm than the Abarth because most mainstream cars lose value quite quickly. The Abarth performs so well largely because it’s a hot hatch made in small numbers, so it’s something of a collector’s piece. However, the Kia Picanto is very much a mainstream car and in 1.0 Wave form it’s not far behind the Abarth; we reckon it’ll be worth 47.1% of its new list price when it’s three years old. Intriguingly, the top 20 city cars list is dominated by Abarths (595 and 695), Kia (Picanto) and the Ford Ka+. While the latter two sell in big numbers, they both have a keen following which keeps values high. You don’t have to drop very far down the table to see retained values drop quite sharply. Go down a few dozen entries and the retained values are around 40% for cars such as the Skoda Citigo, Toyota Aygo and some versions of the Fiat 500. What’s interesting is that at 38.5% is the Ford Ka+ diesel, whereas its petrol-engined counterparts retain more like 45% of their value after three years. While this may be down to less demand for diesel, much of the higher level of depreciation will be down to the car’s higher list price when new. Superminis A posh badge and a bit of luxury will work wonders for a car’s retained value. An all-new Audi A1 has recently been launched, and according to our calculations this model dominates the top end of the supermini segment over the next three years, when it comes to retained value. Only petrol-engined cars are available and whichever one you buy it’ll retain around half of its value over the next three years (and as much as 53.6% in the case of the A1 25 TFSI SE), which is especially impressive when you consider that at the bottom of the table the retained value is more like 25-30%. Perennial demand also leads to limited depreciation, which is why the Ford Fiesta also retains around half of its value at 3 years old – at least in 1.5 Ecoboost form. Ford may not be a premium brand, but its cars are often some of the most talented in their respective segments, and that’s definitely the case where the Fiesta is concerned. Not far behind is the Mini, which holds on to as much as 47.6% of its value (for the Cooper S Sport II) – although this drops to 40.1% for the Mini One Classic in automatic form. Once again this shows how a bit more power and luxury can have a very positive effect on depreciation rates; entry-level cars often lose a greater proportion of their value than their more upmarket equivalents. Small family cars Known as the lower medium segment in the trade, the small family car sector is the most popular across the whole of Europe. If minimal depreciation is key to you as a buyer, it’s the Toyota Prius that you need to put on your shopping list as this is worth up to 60% of its new list price after three years. The Prius is a car with an emphasis on low running costs, so it’s interesting that the car that gives it the toughest time in our tables is the new Mercedes-AMG A35 – a car with a focus on performance and luxury. Buy an A35 and the retained value will be as much as 58.7%. However, if you buy one of the more mainstream editions this figure can be cut to as little as 46.7%. While 46.7% may be less desirable than 58.7%, in the grand scheme of things it’s still impressive – not least of all because the cars at the bottom of the table are sitting at 25% or so. Or to put it another way, whereas the Mercedes A-Class is expected to retain around half of its value over the next three years, some variations on the Fiat Tipo, Skoda Rapid, Seat Toledo and Peugeot 308 model ranges will lose more like three-quarters
How the Colour of Your Car Affects its Value
If you plan on keeping your brightly coloured car for more than a couple of years, be aware that its value might not stay as bright as its paintwork!
New Car Prices Rise 38% in Last Decade
Analysis by automotive data experts cap hpi has revealed the average price of a new car has risen 38% over the last decade. The average offered price of cars has increased from £24,383 in February 2008 to £33,559 in February 2018. The experts argue that while cars sold today are fitted with much more technology, from satellite navigation to self-parking, the increased cost is not always reflected in the price rise. New technology is often rolled out as standard by manufacturers seeking to improve the competitiveness of their products. Matthew Freeman, managing consultant at cap hpi, said: “The real driver of this is the changing structure of the marketplace. Over the past decade, we’ve seen more expensive models being rolled out. We see more SUVs on our roads, and they are usually more expensive than the equivalent saloon.” The company’s data also reveals more premium brand cars across almost every segment and premium brands experimenting with new segments. The expansion of diesel ranges has also driven up the average price of a new vehicle as diesels are around £1000 more expensive than the equivalent power petrol version. Freeman said: “Many brands have moved to offer a more luxurious specification mix and eliminated their entry-level specifications. This is partly a response to PCP making cars more affordable, and consumers moving up to more expensive models. It’s also worth noting that those base models were not especially desirable in the used market, and had poor resale values. “PCP has also shifted focus from the entry price to the monthly repayment and having a model to advertise as ‘From £9,995’ is no longer a priority – cars are more likely to be advertised on their monthly payment.” PRESS RELEASE