Used car prices fell sharply in March as the cost of living crisis began to bite.
Prices at the three-year, 60,000-miles mark dropped by 2.1 per cent – or around £360 – during the month, valuations experts Cap HPI have told Car Dealer.
It’s the biggest price movement Cap HPI has seen since March 2020 just as the UK went into lockdown.
Despite this, prices aren’t in free-fall and March’s drop is just a ‘realignment’, said the firm’s director of valuations, Derren Martin.
‘It’s taken us a little bit by surprise compared to how we started the month,’ he said in the video posted at the top of this story.
‘But a lot has happened over March.
‘There are the horrendous events in Ukraine, and the cost of living increases are playing on consumers’ minds.
‘There’s been less consumer demand for vehicles, and therefore a bit of a reticence from dealers to restock in volumes. There’s a bit of wariness in the market.
‘But you’ve got to put it into context with what’s happened over the last year with values going up by almost 30 per cent,’ he said. ‘A two per cent drop still means cars are worth thousands of pounds more than they were a year ago.’
The downward price movement is happening sooner than Cap HPI predicted, though.
‘We thought it would probably be around Easter and onwards, but it’s happened slightly earlier than that,’ said Martin.
‘It’s not a case of “what goes up must come down”, but some used car prices are looking high.’
He added: ‘We don’t think we’re going to lose the 30 per cent that went on values last year, but we will lose some value over the course of the year.’
Like in February, it’s the cars in the £15,000 to £25,000 bracket which are being squeezed the most, with customers seemingly more reluctant to splash their cash.
Cars around the £5,000 mark and over £50,000 are ‘holding up well’, with the former tending to be necessity purchases, while buyers spending £50,000 and more could be less affected by the cost of living squeeze, explained Martin.
March was no different in having different ‘moving parts’, said Martin, with values dropping for the Tesla Model X due to good availability of the smaller Model 3, and city cars on the whole falling but models like the Hyundai i10 actually rose.
And as for the Vauxhall Zafira – which arguably became the archetypal used car to have experienced crazy price growth in 2020-21 – prices have fallen by around six per cent or £700 and have ‘overcooked’.
Looking ahead Martin said it’s ‘not all doom and gloom’, and while there is currently a cost of living squeeze buyers will get used to ‘a new normal’.
‘For dealers, they may have to work just that little bit harder for those sales and to encourage consumers to part with their money now.’