Secondhand car prices tipped to fall 30pc

Secondhand car prices are tipped to fall sharply, driven in part by struggling rental car companies needing to offload some of the 50,000 vehicles they have in their yards.

Rental Vehicle Association chief executive Pim Borren said he had been advised that secondhand car prices could fall by as much as 30 per cent as the country came out of lockdown.

Rental car companies employ 2500 people and usually turn over $700 million a year.

But many of them derived 75 to 80 per cent of their business from international visitors and did not expect to see customer numbers return ‘‘in any real volume any time soon’’, Borren said.

Even some ‘‘brand names’’ in the industry might ‘‘not survive Covid-19 around the world’’, he said.

Rental car companies usually either leased their fleets or bought new vehicles from manufacturers under contracts that allowed them to sell cars back to those manufacturers at an agreed price.

But manufacturers were using ‘‘force majeure’’ clauses in those contracts to renege on those buyback agreements because of an expectation prices were about to fall, Borren said.

‘‘Suddenly you are left with a bunch of vehicles you no longer need because you have got no customers and you can’t get the price you expected to get for them selling them back to the company.

‘‘Everybody is struggling but the rental vehicle companies are really the meat in the sandwich.’’

They were ‘‘absolutely’’ likely to have to release some of their vehicles, he said.

Motor Trade Association strategy manager Greig Epps believed it was too early to say what the secondhand market might look like coming out of lockdown.

Car dealers had had to bear the cost of cars – which were often bought on finance – sitting in their showrooms during the level four lockdown, and only some dealers were likely to open during level three, he said.

There was also quite a lot of stock ‘‘sitting on the wharves’’, Epps said.

Demand was expected to fall because of unemployment and cautious consumers deciding to hang on to their cars for longer.

But the supply of vehicles was also set to drop, he said. ‘‘In many instances new car manufacturers stopped producing overseas. We have also heard that activity in Japanese auction houses is a lot lower. So we are expecting usedimport volumes in May and June to be about 25 to 30 per cent of normal.’’