When the COVID-19 lockdown ends, will it be a good time to buy a new car?

covid-19 lockdown ends

When is a good time to buy a used car? For most people it’s when they can get a good deal; when prices are suppressed for some reason; when sales execs are open to haggling and putting sticker prices to one side.

Difficult making predictions

The word unprecedented is being used an unprecedented amount at the moment. This means we have no data on what’s really going to happen with car sales when COVID-19 lockdown ends. Forget about the form book going out of the window; it hasn’t been written for this situation yet.

What Car? says get in quick

Experts at What Car? say anyone considering buying a new car should act promptly to nail down a deal. That’s because once COVID-19 lockdown ends, they believe demand is likely to outstrip supply. You can buy cars currently. Dealers are allowed to sell online and deliver with social distancing measures. And potential buyers can test drive cars alone on dealers’ trade plates.

covid-19 lockdown ends
Potential buyers can still browse, select and purchase cars online

But how strong will demand really be?

It’s difficult to predict this because organisations such as CAP HPI don’t have data to back this up so much of it is speculation. It could go one of two ways: once COVID-19 lockdown ends, there will be plenty of people wanting or perhaps even needing a new car. This pent-up demand is expected to outstrip the supply – at least in the short term.

That’s the What Car? view and the logic behind it is sound. While we’ve been stuck in our homes, so have the people who build, ship and prepare cars. That means in the short-term at least, demand could exceed supply, reducing the need for buyer incentives.

On the other hand, demand might be slow, allowing supply to keep pace with it. Investment bank Jeffries found that confidence among Brits was weak: more than half in the UK said they were now less likely to book a holiday next year. Crises damage our appetite for risk with households and businesses hanging onto their money for longer. If this happens, and car sales are slow there will have to be incentives in the way of price cuts to stimulate the market.

Production is restarting

At the start of May 2020, car firms in the UK and abroad are phasing in restarting production. But they have still lost more than a month of build time. UK car manufacturing for March was down by more than a third (37.6%). April will see a greater fall.

This is likely to mean a relative shortage of new cars compared to demand. In real terms, that will result in prices holding strong. There are less likely to be what’s known as tactical registrations (or pre-registrations where dealerships register cars to record sales) and therefore fewer bargains for canny buyers.

covid-19 lockdown ends
Factories all over Europe such as Nissan’s in Sunderland have been shut

What will happen to used cars?

The used car market tends to follow that for new cars. If people aren’t buying new cars (because they can’t get hold of what they want), they won’t be freeing up cars for the used car market. Again, low supply means prices will hold strong with little in the way of bargains.

Going forwards?

It’s difficult to say. If there is a supply shortage that gradually sorts itself out, the market might then swing the other way. There is expected to be a global recession as the world suffers the after-effects of COVID-19. Taxes in the UK are likely to rise as we pay off the debt incurred by responding to the pandemic. The cost of living will go up and we’ll have less money for luxuries.

Following the 2008/09 financial crisis, annual car sales in the UK slumped to their lowest since 1995. A scrappage scheme had to be brought in to get buyers back into showrooms and reduce the excess supply of new cars.

Some experts already believe a similar incentive will be required in the mid-term following COVID-19. That means if you can’t buy before the end of lockdown, it might make sense to hang on if you can and bide your time. But as well as being unprecedented, things are unpredictable so it really is difficult to say with any accuracy.

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