Valuation issues arise as ‘Covid cars’ with irregular specifications hit the used market
The Covid-19 pandemic has had far-reaching effects on various industries, including the automotive sector. One of the consequences of the pandemic is the production of ‘Covid cars’ – vehicles made during the pandemic with irregular specifications. These cars were created as a response to the semiconductor shortage that disrupted the supply chain, leading manufacturers to sacrifice certain non-core equipment to reduce vehicle shortages and lead times.
As these Covid cars start to appear on the used car market, they are causing valuation issues for vendors, dealers, and consumers. Marcus Blakemore, chair of the Vehicle Remarketing Association’s Industry Trends Committee, highlighted the challenges faced by dealers and traders who are buying cars only to discover that key items are missing from the expected equipment and specification levels.
The impact of ‘decontenting’ on vehicle values varies from model to model, with some cars missing essential features such as heated seats, head-up displays, electric door mirrors, electric seats, and even analogue instrument clusters and clocks. The Association of Fleet Professionals (AFP) had previously warned about the risks associated with decontented cars, and now the remarketing sector is grappling with how to address these valuation issues.
One of the main concerns is the lack of available data about these Covid cars, as few manufacturers have kept detailed records of how the vehicles were decontented. This lack of information is leading to confusion among dealers and traders, who may not realize they have purchased a Covid car until it goes through the inspection process. This raises questions about whether buyers can request discounts, return the car, or resolve the specification problem.
Cap HPI, a leading automotive data provider, has responded to these concerns by explaining how they handle valuation differences between cars with revised or reduced specifications. They create individual cap IDs for vehicles with significant specification changes, but caution is needed for cars with subtle variations in trim names that may have different levels of specification.
Overall, the emergence of Covid cars on the used car market is a relatively small but growing issue that is expected to become more significant as more of these vehicles enter the remarketing cycle. Dialogue and collaboration among industry stakeholders will be crucial in addressing the valuation challenges posed by these unique vehicles.