The wholesale used car industry is being starved of repossessions as drivers turn their cars into cash rather than hand them back to finance companies.
Drivers who are behind with their monthly payments have been avoiding vehicles being repossessed by turning to a growing number of car buying service companies that will buy their used car online and settle all unpaid finances.
With used cars in short supply and prices high, drivers are making hundreds or even thousands of pounds on the sale whilst protecting their credit score.
The industry had been expecting tens of thousands of used cars to hit the market during 2021 and 2022 after car repossessions were put on hold by the Financial Conduct Authority (FCA) during the pandemic.
The FCA warned lenders not to consider repossession as drivers had either lost their jobs or their earnings potential had been compromised. The FCA lifted its ban on the 31 January 2021, but the steady stream of used cars expected by auction companies has never hit the open market.
“It’s another issue that the used car industry has had to deal with. The wholesale sector is being starved of tens of thousands of used cars that are not finding their way onto the open wholesale market. Car buying service companies are buying them, paying off the outstanding finance and selling them direct to consumers.
“It’s good news for drivers who have fallen behind with their car repayments, but this trend has contributed to the wholesale market being short of used cars,” explained Alex Wright, managing director of Shoreham Vehicle Auctions.
Over the summer period used car demand has slowed as drivers have invested in family holidays rather than replacing their car, but Wright predicts the market could warm up again in September and October, despite the current economic climate.
“Many drivers are being put off replacing their used car by rising household bills, but as running costs rise as their cars get older, they will be forced into looking to buy a replacement,” said Wright.
“We don’t believe used car demand will go through the roof during the winter until drivers get a better handle on how challenges like rising energy prices will impact their available cashflow. However, used cars are still in short supply so we won’t experience a major fall in prices. It will be Spring 2023 before we have a better idea on future used car trends and this will depend largely on whether new car supply improves,” he added.
