In this blog we provide a short run through of what is happening with used car prices. Our conclusion is that the UK used car market remains in good health currently. But what happens next is unpredictable…
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What’s happened recently?
Used car prices overall haven’t changed much since the summer but remain strong
Prices are significantly higher now than in September 2021. We might have reached the peak in used car values so now could be a good time to sell.
The cost of living crisis has reduced demand for both new and used cars
Auto Trader said that used car searches were 10% lower on its platform in August. The number of used car transactions in Q2 2022 were down 18.8% on Q2 2021 and are set to be lower overall this year according to the Society of Motor Manufacturers and Traders (SMMT). Although 2021 (like 2020) was an extraordinary year given the impact of the pandemic.
What about the future?
New car supply remains constrained and is not likely to recover until late 2023 or 2024
This means the number of new cars set to enter into the used car market will remain subdued for some time to come. Low supply from the new market will serve to keep used prices at higher levels.
Used car price predictions are difficult to forecast
The cost of living crisis and lower used car supply are two opposing forces when it comes to price. Where prices go over the next few months will be dependent on whether demand for used cars falls more quickly than supply of both new and used cars.
Downtrading of vehicles likely to become even more commonplace
With many people set to struggle with the cost of living through the winter months, and used car prices still high, we will likely see vehicles being sold and replaced with cheaper equivalents. As there is a lack of 1-3 year old cars in the market this could mean even stronger demand for older lower mileage vehicles.
Government’s mini-budget unlikely to stimulate car buying demand
The Government’s recent mini-budget has not been welcomed by the markets and many organisations. The only measures that provide financial assistance in the short term are the energy price cap freeze (1 October) and reversing of the National Insurance increase (6 November). On average, with all other things equal, most consumers will have less disposable income this winter. The main cause: we will be paying twice as much to heat our homes compared to last year.
What have the experts said?
Cap hpi the vehicle valuation provider:
Used car values haven’t moved at the three-years, 60,000 miles benchmark, however, in a market that remains stable from a pricing perspective. Uncertainty surrounding the balance of supply and demand had created the most difficult period ever to forecast used car value trends. Source: AM online.
Glass’s the vehicle valuation provider:
The average residual value of a three-year-old car in the UK increased by 3.8% month on month in August. Whilst positive, this movement does not accurately reflect the country’s general used-car market, instead it reflects rising list prices and the shortage of three-year-old models available in the market. Source: Autovista24
Auto Trader:
The number of consumers using its platform has actually fallen every month since February this year. Auto Trader cautioned that although these figures were down on last year, they were actually up 17 per cent on 2019 (pre-pandemic) and said it believes there’s still an ‘underlying health’ to the used car market’. Source: Car Dealer Magazine
Auto intelligence firm Indicata:
EV sales were up 53.3% year-on-year from July during August. But stock turn fell due to a shortage which saw overall used market stock levels decline 6.4% between early August and September but remain 8% higher than for the same period in 2022. Source: AM online.
Online car broker Carwow:
Since December 2021, the average used car price has increased by 22%, from £12,500. For anyone looking to sell a used car, or weighing up whether to do so, now represents a great opportunity to cash in. The rise in used car values is good news for anyone with a second or third car they are thinking of selling, not least given the squeeze households across the country are feeling, but also for anyone looking to upgrade their main car. Source: Regional online news outlets
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