18 January 2023

The losses month on month in the sales-volume index in the UK in December made the domestic market an anomaly in the wider European figures, with other markets seeing gains. In addition, across these wider European markets, used-car prices continue to outpace list-price developments.

Accordingly, RVs of three-year-old used cars, represented as a retained percentage of their original list price, either held firm or gained in December, unlike in the UK. The month-on-month deviations were all in a narrow range of -0.6% in the UK to 0.8% in France. Year on year, there were double-digit gains except for the 6.9% growth in France and the 2.5% decline in the UK. These are the findings from the latest Autovista monthly dashboard.

The depreciation trend in the UK’s used-car market continued in December, with the average %RV for three-year-old cars falling 0.6% month on month to 61.7% of the original cost-new price. Compared to December 2021, the average %RV was down 2.5%.

“This is quite extraordinary when we consider that values increased by around 30% in 2021,” said Jayson Whittington, chief editor at Glass’s, part of the Autovista Group. “So, despite lacklustre retail demand, values remained high throughout 2022, a reflection of the lack of used stock flowing into the market. This is confirmed by the active-market volume index, which shows a year-on-year decline in available stock of about 30% during December.”

For 2023, it is important to recognise that most households in the UK have already experienced shrinking disposable incomes. Whilst consumers have been shielded from the full impact of rising energy costs by the UK Government’s Energy Price Guarantee, this cap on prices is due to be raised in April 2023 – adding £500 to the average annual bill.

In addition, consumers are facing sharp inflationary pressures affecting many everyday essentials. Recent interest-rate hikes have also significantly added to the burden of mortgage holders, and the cost of car finance has also increased. It therefore seems inevitable that the UK will enter a recession as consumers grapple with a new reality.

A recession does not necessarily spell danger for the used-car market though. Past recessions have shown that the used-car market is very resilient as consumers tend to continue buying cars. However, they will perhaps look at a cheaper model or buy a used car instead of new.

It is also important to remember that in March 2020, the UK began to experience the effects of Covid-19 lockdowns, which kicked off the start of new-vehicle supply constraints. Therefore, fewer cars will be returning to the used-car market in 2023, which will help to prop up RVs.

“So, despite some challenging times ahead, Glass’s does not expect RVs to come under serious pressure although a downward correction in the region of 5% is likely,” Whittington concluded.

Tags: 2023, Autovista, Glass's, Jayson Whittington, RV, Used