You wouldn’t say it sometimes when you drive past a large dealer or dealer and the occasions rows are thick, but there is really a scarcity, after more than two years of corona storm and now a war. No one could have imagined that the consequences would be so far-reaching. In a way, the world looks completely different than it did in 2019.
How could the virus have such a huge effect on – in this case – the new and used car market? The many factory closures of parts suppliers in China are an important cause. Nowhere in the world was the lockdown as strict as there and even now the situation is not stable. When you, as a car manufacturer, are waiting for a few containers full of headlights, which do not come, you can shut down the entire production line. And then we are only talking about one part for one specific brand or type. Shiploads of parts and of course batteries for EVs from the Far East arrive every day. At least, that’s how it should be. Entire factories in Europe were also at a standstill during the lockdowns and that backlog is far from being made up, not to mention the chip shortage.
Collapsed car rental
Traveling was also barely possible. The sky remained blue, without the familiar white streaks of holidaymakers and businessmen flying overhead. This in turn meant that rental cars remained at airports and rental companies did not refresh their fleet. The latter produces trucks full of young used cars, which roll into our showrooms from airports in the south of Europe.
To get money as quickly as possible, Hertz sold 700,000 cars.
For Hertz, one of the world’s largest car rental companies, this even led to bankruptcy in 2020. In order to have money as quickly as possible, Hertz decided to sell 700,000 cars. Providence suddenly lent a helping hand: the global crisis that brought new car production to a standstill due to the lack of semiconductors, among other things, pushed used prices to unprecedented heights. The depreciation with which Hertz had calculated suddenly looked completely different and the ‘ex rentals’ yielded much more than expected, because many public transport travelers in the United States also made the switch to their own car. This, together with the shortage of new cars, pushed up the prices of used cars. In the end, the bankruptcy of rental giant Hertz was averted after two New York equity funds took over.
More demand for occasions due to less public transport
In the Netherlands, too, we saw the demand for used cars rise during the corona crisis, because many travelers turned their backs on public transport. In a certain period this was because there were simply no trains or buses, then because of the fear of having to stand or sit next to a coughing or sniffling fellow traveler and then still get infected. No, I’d rather go to work in your own familiar cocoon, for those who didn’t have a home office. So it happened that more than two million used cars were sold in both 2020 and 2021.
New sales slumped
At the same time, we saw a decline in new sales. In 2019 we recorded more than 450,000 units, in 2020 that dropped to 358,000 and in 2021 to less than 325,000. Much has also changed in the business market. The lease drivers made fewer kilometers and some of them drive on for a year longer. That happens more often anyway in order to enjoy the lower addition to the maximum in this way. Thanks to this policy, the market for used EVs is taking off even more slowly, with the government pointing an accusing finger at the car industry saying that it is doing too little to stimulate the sale of electric used cars. It’s a case of ‘the pot calling the kettle black’.
Chain reaction corona and war in Ukraine
We will listen to Gerard ten Buuren, chairman of Bovag Independent Car Companies and associated with residual value specialist Autotelex as a business advisor. “There is a lot going on in the market and corona, along with the war in Ukraine, has started a chain reaction. The main consequence for the consumer is the higher price that must be paid for a used car due to the scarcity that prevails. This, combined with rising demand, leads to rising purchase prices for traders. The car that is used as an alternative to public transport is in the price range of five to fifteen thousand euros. There was and is a great demand for it. The young occasion is also very popular. It is widely imported. However, even in Germany, where many of our used cars come from, things are starting to get tough and prices are rising. Buyers therefore have to bid much higher and see their margins partly going up in smoke. Despite this, as many cars are imported as new ones are sold. The large shortage of new cars will not change for the time being. Consumers increasingly see a young used car as a good alternative to a new one, even if the price is relatively high. The big plus is: the customer can drive straight away, there is no question of a long delivery time.”
Volkswagen e-Golf with German export registration, for import into the Netherlands.
More imports, more used EVs
It will come as no surprise to anyone that the market situation in our eastern neighbors is not much different than in ours. In addition, there is an increasing demand for used cars with a petrol engine, after the diesel was also very popular for decades. Ten Buuren: “There are still more than a million diesels on the road in the Netherlands and it is not entirely right to put them in a bad light. The latest generations of diesel engines are especially efficient and have relatively low NOx and carbon dioxide emissions. That does not alter the fact that traders will not be so quick to buy a young used diesel, although that can still be very attractive for some consumers.”
Fewer used cars sold in 2022
In the first three months of 2022, 3.7 percent fewer used cars were sold than in the same period last year, and the shortage is also the main cause there, according to Ten Buuren. “So it is not due to falling demand. And there is again an increase in imports in that quarter, namely 4 percent. We also see an increase in the sale of used EVs, which rose to more than 13,000 units in the first three months. Many of the Dutch ex-lease cars go for export, such as the diesels with high odometer readings and the heavy hybrids. These were very attractive for the business driver for five years, but are completely uninteresting for our used market.”
No more cheap little ones
At the lower end of the market there is also a development going on, namely the quiet disappearance of the small, somewhat affordable new car. We are talking about the A-segment, which many people know from, for example, the Toyota Aygo and Suzuki Alto. More and more brands no longer bother to be present in that class. Opel, Citroën, Peugeot, Renault and Ford are examples of this. The offer that is still there also quickly starts at € 15,000 and with a few option packages and assistance systems that goes through the twenty thousand.
Opel Insignia, a nice occasion that you can buy for a relatively good price.
For that money, or less, you can buy a nice occasion of a size larger or a young used A-segmenter, which has always been relatively expensive. Another reason for the increasing demand for used cars is the rise of the electric car. Many people may want to make the switch, but can’t at the moment, because an EV is quite expensive. Or maybe they want to wait a few more years until the switch and to bridge that time, an occasion can be the ideal interim solution. Or those who want electric and don’t feel like waiting a year for a new car, opt for a used one, which is relatively expensive.
Twelve months warranty
Recently, the legislation has been amended and car companies must provide a 12-month warranty on a used car. A good development for the consumer, but an increased risk for the garage owner, so we will also see this reflected in the prices. So is there any good news for consumers? Gerard ten Buuren: “Perhaps the only positive thing is the fact that someone’s car is worth almost as much as it was two years ago. If you bought an occasion from 2018 then, you now sometimes get almost the same in return.
So depending on the car you buy back, that can give you a nice advantage. What the same buyer should take into account is that it is no longer an advantage if you enter the showroom without a trade-in, where you could sometimes count on a discount in the past. There is usually no more haggling, because the asking prices are sharp and the margins thin. Then there is little room for maneuver. Sometimes dealers have to buy cars at a price that the same car was for sale a year ago. I don’t see the tide turning any time soon. On the other hand, the consumer can choose from a range of more than 300,000 used cars, so the chance of a good deal is still there.”
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