7:34 am, November 28, 2022
Used car prices in the trade have dropped 1.2 per cent this November, according to the latest data – with electric car prices plummeting.
In an exclusive video interview with Car Dealer, which you can watch above, Cap HPI’s director of valuations Derren Martin revealed the latest figures.
The fall was a far better performance than usually seen in November when used car prices traditionally drop around three per cent.
It was also better than the predictions Martin and his team had made earlier this year when they forecast used car values would drop up to five per cent over a two-month period at the end of this year.
However, the 1.2 per cent fall is the third largest monthly drop recorded this year.
Martin said: ‘That’s a small movement down. It’s also one of the strongest Novembers that we’ve seen looking back over time – it’s pretty strong.’
Values traditionally drop in November and December before rising again in January as car dealers stock up for sales and the new year.
Cap HPI gathers its prices from 55 data sources including auctions, rental companies and car manufacturers. It looks at trade prices – the figures dealers pay each other for the cars sold on forecourts before they add their margin.
Martin agreed there is a disconnect about what consumers think is happening to used car prices and what is really happening in the trade.
He said that while the cost of living crisis is having a slight impact on demand, it’s nowhere near as severe as many think.
Mainstream media reports have prophesied a ‘used car price crash’ – but Martin said that isn’t coming.
‘From all the analysis we’ve got from our forecasts three to five years in the future, we don’t see that happening,’ he explains in the video interview.
He said there will be drops seen in the used cars that are currently costing more than new as the supply of those models start to come through, but elsewhere it will be a gentle ‘downward movement’.
Used car prices rose 30 per cent last year and Martin says they are not going to crash back down, but instead fall gently from those new highs.
Martin added: ‘As new car supply improves next year and the cost of living concerns hit, you will get changes in those supply and demand dynamics. But we’re certainly not predicting that values will come down by anywhere near what they went up by. So there has been a new level reached.
‘Last year, used car values went up by 30 odd per cent, which is absolutely unprecedented. A crash is just not going to happen.
‘The reason that cars aren’t going to just drop in value in the used car market is because there’s just simply not enough supply. There’s two million less new car registrations in the market.
‘Those cars are never going to appear as used cars. So there’s just not the supply there to cause a huge crash.’
Electric car prices plummeting
However, Martin and his team are seeing the values of electric cars drop considerably as the price of energy rises.
He said this area of the market has been particularly impacted by the cost of living crisis and the rising cost of electricity.
Teslas have been particularly badly hit with some down thousands of pounds on last month.
‘On average, electric cars dropped 3.7 per cent in November compared to the 1.2 per cent fall across the market,’ said Martin.
‘Consumer demand for electric vehicles has dropped away.’
Martin said people are being put off by high charging costs and the fact they are more expensive to buy than equivalent petrol or diesel models.
‘Electric cars are often an aspirational purchase and in a cost of living crisis people are not necessarily going out and buying them at the moment,’ he said.
‘They’re expensive vehicles and there’s more of them coming back into the market. So it’s kind of the wrong time with demand dropping away and supply increasing – that really only leads to one thing.’
Biggest used car price falls in November 2022
Trade prices compared to October 2022, according to Cap HPI data
- Tesla Model S – down £2,767 (-5.9%)
- Tesla Model 3 – down £2,275 (-6.8%)
- Audi e-tron – down £2,154 (-5.9%)
- Mercedes E Class cabriolet diesel – down £1,908 (-6.8%)
- Subaru BRZ – down £1,030 (-5.9%)
- Renault Zoe – down £808 (-5.9%)
- Dacia Duster – down £728 (-6.8%)
- Smart ForFour electric – down £600 (-5.9%)
*Mercedes E Class cabriolet derivatives of different ages and derivatives made up three places in the top 10 list and have been removed
Tesla Model 3s have dropped nearly seven per cent or £2,275 and Model S nearly six per cent or £2,767 compared to last month.
Martin said the Model 3 had actually fallen 16 per cent in the last three months – that equates to around £7,000.
Electric cars make up five of the worst performing used cars in November when it comes to the biggest price drops.
He added: ‘There are some big chunks coming out of some of those electric vehicles, it’s not just Tesla, either by any stretch of the imagination, but Tesla does seem to be one where there’s a lot of volume coming back in. And they are quite expensive.
‘We’re definitely seeing a pattern. From speaking to dealers, they’re concerned about electric vehicle prices. Auction companies are asking us about that as well and asking if we are seeing the same thing and obviously we are.’
There were some price rises in November, though, with the Mercedes V Class rocketing £2,392 or five per cent on October prices.
The Mercedes S Class rose 3.1 per cent or £1,767 while Land Rover Defender models climbed 4.3 per cent or £1,689.
‘They’ll always be snippets of cars that go up and perform quite well, but in general, it is a movement down for most vehicles,’ explained Martin (see full video interview below).
What’s next for used car prices?
Martin has a mixed view on what happens next.
In the video interview he explains that a few months ago Cap HPI was predicting a five per cent fall in a two-month period so the market has been stronger than he expected.
He said: ‘What comes next? That’s a really interesting one, because January you can tend to get a bounce back.
‘Are people going to be logging online on Boxing Day and shopping on used car websites and looking for cars this year with all the concerns around spending? I’m not quite sure.
‘I’ve not spoken to a single dealer that is saying they’re stocking up for January. It remains to be seen what happens in January.’
He said what is clear is the supply issues are not going to be fixed any time soon and with new car sales expected to be depressed next year – at around 1.8m registrations – it’s not going to be ‘back to normal’.
‘There just won’t be the cars in the market to cause a seismic shock,’ he added. ‘So, I think it’ll be quite stable in January.’
Will a recession cause used car prices to drop?
According to the chancellor Jeremy Hunt, the UK economy is now in recession and there are many who think this could have an impact on used car prices.
But Martin is not so convinced. He has looked back at the data from previous recessions and the used car market normally performs pretty well in a downturn.
He said: ‘We’ve tracked back over previous recessions – the early 90s and around 2008 with the financial crisis. Then, used car values were hit, but they came back very quickly in 2009.
‘In the recessions that we’ve tracked, used car values were pretty good, pretty strong.
‘Some consumers may not buy a new car in a recession so instead they might buy a used car. They may downsize, but they still need transport.
‘So that will force them into the market to buy a used car. In general, when we’re getting into recession, used cars are buoyant.’
For the latest on used car prices and the market, visit our dedicated used car section.
