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Dip in value of older used cars could be ‘pre-cursor’ for wider market decline

Line-up of used cars

Declining values among older, more affordable used cars could be an indicator that the market is set to dip after March delivered another decrease in average vehicle prices, according to Cap HPI.

The average value of a used car at Cap HPI’s benchmark of three years and 60,000-miles has declined 0.5% at the end of a trading period which had “surpassed all expectations” for many car dealers, according to the valuations provider.

But the Easter holiday period and cost-of-living pressures could be about to soften their upward trajectory.

It highlighted to a 1.3% decline in values at 10 years in its outlook for the coming months, stating: “As March closes and we enter the Easter school holiday period, we are likely to see an end to the three consecutive months of average increases at the three-year age point.

“The older end of the market has already turned, albeit slightly, and this can be a pre-cursor for the rest of the market. There will be increased volumes of used cars arriving into the market, particularly from fleet returns, with cars replaced in March. However, stock is required by retailers, so they will continue to buy, but maybe not at the same prices as previously.”

Derren Martin, Cap HPICap HPI’s director of valuations Derren Martin reported that values were up 0.4% month-to-date in his regular mid-month catch-up with AM earlier in March.

He reported that used electric vehicle (EV) values had continued to decline as falling values dented dealer confidence but boosted affordability for car buyers looking to make the zero emissions transition.

Cap HPI’s month-end market review revealed that average used EV values had reduced for a seventh consecutive month, falling 5.4% at three years (equivalent to c.£1,500).

The report said that the price of certain EVs – including the Jaguar I-Pace and Tesla Model 3 – appeared to have stabilised, however, as value declines slowed overall from the 7.5% and 6.6% seen over the past two months.

Tracking Cap HPI’s average cumulative value movement for EVs over the last seven months reveals what it described as an “eyewatering” 29.9% decline.

Over the same period petrol vehicles have declined by 1.4%.

And Cap HPI said in its report that consumer demand for used petrol and diesel cars continues to outstrip that of their EV equivalents.

It reported that “consumer demand remains patchy, with the cost of electricity, range anxiety and press stories putting some people off the move to driving electric”, adding: “There also remains wide disparities on retail prices for EVs, with those retailers that bought at previous high prices, some even carrying stock purchased as far back as the final months of 2022, reluctant to drop prices due to what the car owes them, whilst those that have bought recently at far lower wholesale prices, can afford to advertise more cheaply and still make a margin.

“Demand is there for EVs, but it is not anywhere near as high as for internal combustion engine cars.”

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