Soaring demand for used vehicles ends with 2022

Cars (photo is illustrative).
Cars (photo is illustrative). Source: Ken Mürk/ERR

The second-hand cars market has begun to cool down, with people rather thinking about dialing back spending in the conditions of rising interest rates and economic uncertainty.

While the price of a vehicle should logically start to fall once it leaves the dealership, the situation on the used cars market was just the opposite in recent years. A slightly used vehicle fetched the same price or more than a brand new one, waiting times for which stretched to half a year or more. The market has been cooling since last fall.

Mait Kalamees, member of the board of Tartu used vehicles seller Tehase Auto OÜ, said that the market started going down in fall, which trend continued until the end of last year.

"People are still buying cars, while there is no longer any rush or overbuying. Sales are much more modest than they were in the first half-year [of 2022].

Kalamees said that while one might think one's seen everything after a long time working in a certain field, recent years' developments have nevertheless been unusual – the market was tumultuous, price skyrocketed, while people still kept buying.

"On the one hand, a crisis arrived in 2021 as new vehicle deliveries virtually stopped and prices started going up in the summer. But people paid what was asked. This trend persisted until September last," he said, adding that used car prices grew 20-25 percent in that period and there was no need for sales campaigns.

Tehase Auto imports used cars from Europe, and Kalamees said that prices have also come down on major German websites.

He suggested that the market has become more buyer-friendly, dealers more flexible, and while everything that came up for sale was moved for a time, sellers are now forced to lower prices.

Taavi Tomson, head of sales for SEB Liising, said private leasing applications were down 20 percent last year compared to 2021, 30 percent in the second half of the year. Swedbank also communicated late last year that leasing applications had fallen by 25-30 percent.

More used vehicles in warehouses

After last spring's used car deficit, dealers have made efforts to fill their warehouses, said Raivo Rumberg, head of second-hand sales at Amserv. He said that private sellers might be having a harder time as people have started to buy used cars from dealers who offer a warranty and carry vehicles that have been fully fixed inside and out.

Rumberg said that he has not noticed a drop in prices, while used cars are selling better than new ones.

Jussi Pärnpuu, member of the board of Auto 100 that sells both new and used vehicles, said that the market is back to normal.

"I would not say the situation today is very different from 2022. Yes, availability might be slightly better. New cars have become a lot more expensive, which trend started last year, and I do not see those prices coming down," he offered.

He added that while prices skyrocketed for a brief spell last year, the situation was normal in the second half of last year and continues to be.

No certainty for the future

Talking about the future, Mait Kalamees said that there is little reason to expect market activity in a recession. The coronavirus crisis was followed by the energy crisis, then war and the chip shortage.

"I believe the first half-year will be tough, as no one knows to forecast anything," he admitted. "Loans and leasing have become more expensive. People with existing contracts are seeing different numbers on their monthly bills. Insurance has also become more expensive. Costs are mounting everywhere. Rather, people are not rushing to buy if they can help it, instead, taking their time to wait and see."

Kalamees said that while spring usually sees an uptick in car sales, courtesy of lower energy bills and sunny weather, families might be considering how to get rid of one of their cars today, instead of looking for a second vehicle.

Raivo Rumberg suggested that the Euribor rate will have a profound effect on the market. Provided it will keep growing, consumers will have little motivation to swap out their existing vehicle.

"Prices will not grow any more," the head of used car sales at Amserv forecast. "It seems they will remain where they are. There might be a very slight dip still, but nothing major. I cannot really see sales dropping. Rather, they will be on par with last year or edge up a little as many companies have vehicles they're looking to sell."

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Editor: Marcus Turovski

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