The used car market in the UK will fail to stage any significant comeback until next year, according to the latest forecast by automotive services provider Cox Automotive.
Even so, the baseline scenario offered in its latest AutoFocus insight, indicates that the market will by the year-end steadily improve on the back of a return of consumer and business confidence.
This scenario – which the company suggests is the most likely to emerge – also anticipates that any recovery will be relatively slow, with minimal change in demand or market dynamics.
Used car transactions for the whole of 2023 are pegged at 7,154,047 units, a 4% year-on-year increase, but still below (-3%) the average pre-pandemic yearly figure with forecasts of 1,866,540 transactions in the third quarter, softening to 1,607,517 by the year-end.
Cox Automotive added that its first-quarter baseline forecast of 1,790,034 achieved an accuracy of 96.8%, closely aligning with the actual figure of 1,847,149, which has supported its confidence in its full year forecast.
The forecast adds that factors including global economic conditions and energy-related issues will continue to act as obstacles to overall growth. Retail pricing will however remain unaffected by interest rate rises and pressures on household expenditure and will therefore help maintain consumer pricing stability.
Philip Nothard, insight and strategy director at Cox Automotive, said the global loss of 42 million new vehicles in production had permanently impacted the future composition of the used market.
“However, our analysis points to a steady improvement in the UK sector for this year, which can be partly attributed to production cycles moving back to near normality,” he said.
“It nevertheless remains a changing landscape and the impact of supply and demand on valuations in the used sector has become increasingly evident in recent months.”
He added that concerns of a “cliff edge” in used vehicle values should diminish once the economy stabilises.
Nothard added that the current state of the electric vehicle market poses a potential risk for the used car sector, pointing out that while 64% of franchised dealers stocked battery electric vehicles (BEV) as part of their used vehicle inventory in 2022, only 11% of independent dealers did.
“This creates uncertainty around the pricing and availability of pre-owned electric vehicles, which could lead to cautionary buying behaviour from both retailers and consumers,” he said.
“By the end of 2023, more than a fifth of 0-1-year-old vehicles in the UK parc is expected to be a BEV, and this figure is projected to increase to 41% for 1-3-year-old cars by 2027. To keep pace with this rapid market shift, the sector must prioritise education, knowledge-sharing, and legislative measures to support the ownership and stocking of pre-owned electric vehicles.”
Cox Automotive’s experts also believe that consolidation and acquisition activities in the wider vehicle industry will boost transaction numbers in the used sector, creating a more streamlined and efficient marketplace.