Used car prices decline, ending 41 months of growth

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【Summary】Used car prices fell for the first time in over three years, with a 0.4% dip in average prices compared to the same period last year. However, experts do not anticipate a crash in prices and note strong growth in certain segments. Older vehicles saw an increase in value, while cars under 12 months old and those aged between one and three years old experienced a decline. The easing of supply constraints has led to more second-hand cars entering the market.

FutureCar Staff Oct 04, 2023 4:19 PM PT

Used car prices decline, ending 41 months of growth

In a significant shift for the motor trade, used car prices experienced a decline last month, marking the first decrease in nearly three-and-a-half years. According to Auto Trader's Retail Price Index, the average price of a used car in September was £17,736, which is a 0.4% drop compared to the same period last year. This contraction in prices is a departure from the consistent growth seen since March 2020.

Despite this decline, experts at Auto Trader do not anticipate a sudden crash in used car prices. They argue that the figure is masking strong growth in various segments of the market. Interestingly, older vehicles, particularly those between ten and 15 years old, saw a significant increase in value, with a year-on-year growth of 9.8%. The 15+ market also experienced a rise of 6.1%. On the other hand, cars under 12 months old fell by 2.5%, and those between one and three years old dropped by 6.7%.

The analysts at Auto Trader attribute this trend to the easing of supply constraints, which has resulted in a larger number of 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 increased supply in the used car market, consequently causing the first overall price contraction in over three years. However, he emphasizes the importance of context and cautions against being misled by the headlines. Despite the softening of overall figures in the coming months, the market remains profitable due to strong demand and limited supply.

Used electric vehicle (EV) prices have been making headlines throughout the year as they experienced continuous decline. With supply surpassing demand, prices have been falling for over a year. However, in September, prices stabilized at £32,142, representing a 22.1% drop compared to the previous year. While this decline continues, the rate of contraction has slightly slowed down compared to August's 22.6% decline.

Richard Walker asserts that despite recent challenges and the government's u-turn on the 2030 ban, EVs are here to stay. He encourages retailers not to be distracted by political developments and emphasizes that as prices stabilize and demand increases, used electric vehicles are becoming a bright spot in the market. The ongoing de-fleeting of previously sold EVs, along with the confirmation of the ZEV mandate, is expected to further increase the volume of used electric cars entering the market. Walker advises retailers to focus on the data and recognize the profit potential offered by EVs, disregarding any smoke-and-mirrors tactics from Westminster.