A third of car dealers predict that used car values will slump by around 10% as the cost-of-living crisis impacts consumer confidence to deliver ‘more difficult’ trading conditions in 2023.

The cost-of-living crisis was cited as the biggest challenge for the sector this year in the latest Startline Used Car Tracker survey, with 85% selecting it among the key influences on the sector, followed by continuing poor vehicle supply (66%), stricter motor finance criteria (38%), reduced motor finance availability (32%) and demand for electric vehicles (26%).

And 32% of the 62 car retailers that responded believe that used car values and prices will fall by more than 10% during 2023 as a result of the current financial crisis.

A further 19% of motor retailers say the drop will be between 5% and 10% and 26% by up to 5%. Only 23% think prices and values will continue at their current level or better.

Startline Motor Finance chief executive Paul Burgess said: “It’s clear that dealers believe the cost of living crisis will bite further during 2023. They think prices and values will fall at the same time as stock availability continues to be a problem. The picture that the data paints is of a market that is going to be more difficult.

“Specific concerns highlighted in the research surrounding motor finance are interesting. From a Startline point of view, business has continued to be buoyant but there is clearly concern among dealers about both the wider availability of motor finance and potentially stricter criteria being used by lenders in a time of worsening personal finances.”

During 2023 limited used car supplies served to keep values and margins high for car retailers.

As volume returns to the market, particularly in the form of new electric vehicles (EV), values are starting to soften, however.

Yesterday (January 16) Cap HPI director of valuations Derren Martin told AM that used EV values were declining at a rate of 2.1% at one year and 10,000 miles month-to-date at the end of last week, compared to 0.9% for petrol and 0.5% for diesel and hybrid cars

Respondents to the Startline survey showed that dealer sentiment towards the used car sector were largely unchanged from December, with a 1% fall in those optimistic about its prospects and a 2% increase in those who are more pessimistic.

Burgess said: “The mood of dealers hasn’t really changed for some time, according to our data.

“There was a definite fall in optimism around September last year as the scale of the cost of living crisis became apparent but since then, survey results have been relatively flat. Dealers certainly don’t seem to think any fall in the market will be modulated.”