Used car values have fallen by two per cent this month, making it the worst August for 13 years – but there’s no sign of a price crash yet.
Sluggish demand and better levels of supply saw used cars in the trade decline on average by £400, or two per cent, in August said Cap HPI’s director of valuations, Derren Martin.
Speaking exclusively to Car Dealer (in the video, above), Martin explained August was the fifth consecutive month of falling values this year.
‘We’re continuing to see deflation in the used car market,’ he said.
‘There are lots of moving parts within that [the two per cent fall], like we always say, but it’s a continued downward trajectory for values, which are still way higher than they were three years ago.’
August edged slightly ahead of July’s 1.9 per cent fall, enforcing the view that the decline is gradual.
But it was the largest drop seen in an August month since 2010.
‘Pre-Covid the average drop for an August was 0.6 per cent, and you’ve got to go back to before we introduced Cap Live daily movements in 2012 to see anything that matches this.
‘To see a movement like this you’re looking at the 2.4 per cent drop in August 2010.’
Martin countered this ‘big movement’, though, saying: ‘You’ve got to put it into context; values are still high and are on average 25 per cent more than they were three years ago.’
Explaining why values slipped in August, Martin said: ‘It’s been slightly worst than dealers probably expected.
‘Not really any dealers have told us that August has gone well for them.
‘Margins are being squeezed and customers are away on holiday so the demand isn’t there.
‘Used cars are still a necessity purchase but above that, the premium sector, has slowed down.
‘With fixed mortgages coming to an end and higher interest rates, I think people are being more wary of cars being more expensive. People are being more cautious and walking away in some cases.’
He added: ‘On the flip side, the wholesale market is doing well with conversation rates in the sixties. There is demand specifically for Cap Clean cars in good condition. But no one is overstocking.’
Martin revealed EVs prices as a whole dropped by 1.7 per cent – a smaller movement than the 2.1 per cent for petrol and diesel cars.
‘Models like the Vauxhall Mokka-e, Peugeot e-208 and Fiat 500e have stayed level, while the Kia e-Niro and e-2008 have all gone up,’ he said.
‘But then you’ve got cars like the Audi Q4 e-tron which have come down and then there’s the Polestar 2 which is under real pressure, with prices down by four to seven per cent.
‘There’s definitely interest from consumers and dealers are certainly buying EVs again, but they’re being selective about what they buy and they’re not stocking many.
‘There are some real EV bargains at the moment – some are cheaper than the ICE equivalents. But then there are others where there’s some more volume coming back and they look a bit expensive. Those are the ones that are coming down.’
Looking ahead to the plate-change month of September, Martin said: ‘I think values will continue to drop a little for a while yet, but it won’t be a crash. It’s a realignment of values.’