June 19, 2024
News

Valuation Concerns Arise in the Used Car Market Due to “Covid Cars”: VRA

The Vehicle Remarketing Association (VRA) has identified emerging valuation challenges with “Covid cars” – vehicles produced during the pandemic with irregular specifications.

These cars are now entering the used car market, presenting difficulties for dealers and traders, as noted by Marcus Blakemore, chair of the VRA’s Industry Trends Committee.

Blakemore explained that due to supply chain disruptions early in the pandemic, such as the shortage of microprocessors, manufacturers had to make adjustments to their production lines. This resulted in the removal of essential features from many vehicles to maintain production continuity.

“Depending on the manufacturer and model, various features were left out – heated seats, head-up displays, electric door mirrors, electric seats, and more. Some vehicles even had analogue instrument clusters and clocks,” Blakemore pointed out.

The remarketing sector is currently grappling with the impact of these missing features on car valuations, which appear to vary based on the vehicle model. Blakemore highlighted that these “Covid cars” are now surfacing in the used car market, posing valuation challenges for sellers, dealers, and buyers.

“While it is generally acknowledged in the used car industry that few equipment items significantly increase the value of any used car, the absence of expected features can make a vehicle harder to sell. For example, a three-year-old luxury vehicle without heated seats may take longer to find a buyer,” he stated.

In 2024, a large portion of the stock is purchased “blindly” by dealers and traders, who may only realize they have acquired a Covid car when it undergoes inspection. This raises questions about possible discounts, returns, or resolutions to the specification discrepancies.

Further complicating matters is the lack of data on these vehicles. Few manufacturers maintain detailed records of the alterations made during production. “We’ve spoken to franchise dealers who, after consulting their databases, claim certain specifications don’t exist, even when the car is right in front of us,” Blakemore added. This data deficiency inhibits valuation companies from accessing reliable information.

Despite some cars being sold with clear indicators of compromised specifications, there is scarce guidance on their value. Blakemore stressed the importance of dialogues on this issue, noting, “Currently, this is a relatively minor yet frustrating issue. However, as more of these cars enter the remarketing cycle, it will grow into a larger problem.”

The VRA aims to raise awareness of this issue to encourage discussions and seek solutions as these Covid-era vehicles continue to impact the used car market.


Frequently Asked Questions

1. What are “Covid cars”?

“Covid cars” refer to vehicles manufactured during the pandemic with irregular specifications due to supply chain disruptions.

2. How are these vehicles impacting the used car market?

The presence of “Covid cars” in the used car market is causing valuation challenges for vendors, dealers, and consumers due to missing features that affect the selling process.

3. How can dealers and traders identify a “Covid car”?

Dealers and traders may only realize they have purchased a “Covid car” when the vehicle undergoes inspection, as there is often limited information available on these vehicles.

Conclusion

The emergence of “Covid cars” in the used car market presents valuation challenges and uncertainty for stakeholders. As these vehicles continue to impact the industry, discussing and finding solutions to the issues they pose is crucial for maintaining transparency and trust in the market.

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