Used car prices rose 6.7% in May as “incredibly strong” demand resulted in “unprecedented times” for the industry.

This is the assessment by Cap HPI’s head of valuations, Derren Martin, in his latest Market Outlook report, which details a rise in the average value of a vehicle of £ 800 this month.

And Martin urged retailers to re-evaluate their inventory to maximize profitability, as stockouts threaten to cause ‘love at first sight’.

Last week, Martin said he saw prices rise “through the roof” as the value of used cars market-wide is expected to continue – potentially with another increase of over 6%. in June.

But as used car retailers told AM that consumer demand is so strong that they “can’t supply the forecourt fast enough,” supply constraints are causing headaches for the whole. of the sector.

Cap HPI said May’s rise in value – more than three times the previous monthly increase in values ​​- could be attributed to strong consumer demand and dwindling supplies.

“We are truly in unprecedented times,” said Martin. “From franchised dealerships to auto supermarkets and independents, activity levels across the board have been incredibly strong, with sales rates ahead of budget and in most cases ahead of pre-COVID rates. “

With some degree of pent-up demand after ‘Lockdown 3’ so-called ‘accidental savers’ with cash to spend, issues with new car supplies and uncertainty about vacations overseas this summer, consumer demand for used cars remained strong.

However, the current increases in car prices, which have manifested themselves in the commercial arena, have not been replicated in the retail trade, making it increasingly difficult for the trade to purchase cars on their return. at advertised retail prices, said Cap HPI.

With many outlets continuing to sell cars purchased a few weeks ago, not all have raised advertised prices for cars based on the increased demand they were experiencing.

Some wholesalers are now selling cars well above 110% of monthly cap values ​​and some manufacturers are selling their cars at close to 120%, according to data from Cap HPI.

This helped make the cars at auction attractively priced, although with increased competition they were also selling well ahead of the monthly cap numbers.

Examples of Cap HPI’s price hikes in the volume sector include: Ford Fiesta up 8.5% (over £ 1,000 at age one); Audi A3 up more than 7% (£ 1,300 at 1 year, £ 800 at 3 years); Vauxhall Zafira up 10.4% (around £ 750 at 3 years); Mazda 6 up 8.1% (around £ 700 at 3 years); BMW X3 up 6.2% at 3 years (around 1,500); and Volkswagen Tiguan Petrol up 10% or £ 2,400 at 1 year.

“There is no tsunami of stocks waiting to appear,” Martin said. “There are well-documented new car supply issues, which means fewer parts exchanges and fleet returns due to component shortages, especially for semiconductors.

“From the end of June / July, stock levels will have decreased and the shortage of components could well have a more marked impact on the offer, depending on the brands. The semiconductor problem may well have an even bigger sting in its tail. “

Commenting in response to new car manufacturing data from April, What Car? Editorial Director Jim Holder today highlighted the impact of the global semiconductor microchip shortage on the used car industry.

As OEMs remain uncertain of the duration of the crisis affecting auto production across the world, Holder said, “Our latest survey of 1,920 buyers in the market found that 38% of new car buyers are unwilling. to wait more than two months for their car. .

“If the wait times cannot be met, 35% of buyers tell us that they will instead turn to existing or used models, which will add pressure on the already inflated used car market. . “