Used car prices fell slightly in February – a performance that has been described as ‘surprising’.
New data shown to Car Dealer reveals prices for used cars at the three-year, 60,000-miles mark slipped by just 0.3 per cent, or equivalent to just under £100.
However, while it was a small amount, expectations were for the market to rise slightly or at least remain level with January’s zero per cent performance.
Speaking on Car Dealer Live – in a video which you can watch at the top of this story – Cap HPI’s director of valuations, Derren Martin, said: ‘It’s a little bit weaker than I expected it to be.
‘January saw prices improve a little as the month went on and that carried into the first week of February. But prices turned after that and ended up at 0.3 per cent down.
‘I thought it might be level or maybe a small improvement, but the fact that it has dropped at three years is a little bit surprising, especially when you consider we’re still about 25 per cent lower on our trade volumes than pre-Covid at this time of year.’
The 0.3 per cent drop comes off the back of a completely flat performance in January, and a 1.4 and 1.2 per cent drops in December and November 2021 respectively.
Some used car values rose
While the overall figure was down, there was some interesting activity within the market, said Martin.
‘Older cars are performing a lot stronger, and have gone up in value,’ he said.
‘At the 10-year point they’ve gone up by 2.6 per cent, so there’s some definite strength in that cheaper end of the market.
‘We’ve also broken that down by value and you can see cars under and around £12,000 are going up in value, while cars under 3.5 per cent.’
Cars £15,000-£20,000-plus are ones which are starting to struggle, explained Martin, and are looking ‘expensive’ for their age and are slipping downwards in value.
At the top end, above £50,000, prices are slightly up with these cars being more immune from consumers’ prudent behaviour found in cheaper markets, and tend to be bought by buyers less affected by the current cost of living crisis.
He added: ‘Also, if you’re a dealer, you can make better margins on a £7,000 car than a £15,000 car. Maybe you buy two £7,000 cars instead of one £15,000 car – that sort of thing is definitely going on.’
SUVs also dropped in February due to better supply than other vehicles types, while MPVs remained uncharacteristically strong.
Improving new car supply is affecting used car prices for certain brands, too.
Martin pointed to prices for used Mini and Tesla cars being lower than average thanks to improving new car supply, which in turn is generating part-exchanges and applying pressure on used values.
‘This could be a pointer for the rest of the year,’ explained Martin. ‘As more new cars start to come through, more part-exchanges are generated and dealers will have more used cars to choose from.
‘This could result in a small drop – but it won’t be a price crash.’
Martin remarked it’ll be a ‘fascinating few months’ as manufacturers struggle with ever-changing new car supply, and dealers hoping a strong March new car order bank will spawn more used cars.
To watch the full interview, click the video at the top of this story.