Used car prices decline, ending 41-month growth

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【Summary】Used car prices fell for the first time in over three years, with a 0.4% dip compared to last year. However, experts don't expect a crash in prices and note strong growth in certain segments. Older vehicles saw their values soar, while cars under 12 months old fell by 2.5%. The easing of supply constraints has led to more second-hand cars entering the market.

FutureCar Staff Oct 04, 2023 11:20 PM PT

Used car prices decline, ending 41-month growth

Used car prices experienced a decline for the first time in almost three-and-a-half years, signaling the end of a remarkable period for the motor trade. According to Auto Trader's latest Retail Price Index, the average price of a used car last month was £17,736, marking a 0.4% decrease compared to the same period last year. Despite this contraction, experts at Auto Trader believe that the dip does not indicate an imminent crash in used car prices. They argue that the figure actually conceals strong growth in many different segments of the market.

Last month, older vehicles saw a significant increase in value. Cars aged between ten and 15 years-old experienced a growth of 9.8% year-on-year, while the 15+ market saw a hike of 6.1%. On the other hand, cars under 12 months old fell by 2.5%, and those aged between one and three-years-old dropped by 6.7%. Auto Trader's analysts attribute this trend to the easing of supply constraints, which has resulted in more second-hand cars entering the market.

Richard Walker, Auto Trader's director of data and insight, explains that the recovery in new car sales has led to an increase in supply in the used car market, ultimately triggering the first overall price contraction in second-hand prices in over three years. However, he emphasizes the importance of considering the context and not being misled by the headlines. Walker highlights that, for the majority of the market, robust levels of price growth continue to be stimulated by strong demand and constrained supply. Therefore, while the overall figures may soften in the coming months, the market remains profitable.

Used electric vehicle (EV) prices have been in the spotlight this year due to continuous declines. With supply surpassing demand, prices have been tumbling month-on-month for over a year. However, in September, prices stabilized at £32,142, representing a year-on-year drop of 22.1%. This slight slowing in the rate of contraction compared to August, which saw a 22.6% decline, indicates a potential stabilization in used EV prices.

Richard Walker emphasizes that despite recent struggles and the government's u-turn on the 2030 ban, EVs are here to stay. He urges retailers not to be distracted by political decisions and emphasizes the profit potential of used electric vehicles. The ongoing de-fleeting of the hundreds of thousands of EVs sold in recent years, along with the confirmation of the Zero Emission Vehicle (ZEV) mandate, will increase the volume of used electric cars entering the market. Walker encourages retailers to follow the data and recognize the long-term viability of EVs as a profitable segment of the market.