Car retailers’ efforts to acquire affordable used cars for their forecourts have driven the sector’s vehicles to their highest February value growth since 2012, according to Cap HPI.

The automotive data specialist said that used car values had increase by 1.1% during the second month of 2020, a figure which was “significantly higher” than the five-year average for February of 0.2%.

Cap HPI senior valuations editor, Jeremy Yea, said that competition for small to medium-sized cars had been particularly strong, with City Car delivering average value growth of 3.3% (£163), Supermini 1.8% (£116) and Lower Medium 1.2% (£102) at three-years and 60,000-miles.

Yea said: "Vehicles in the small to medium-sized sectors remain very desirable, and highly sought after at the right age and price points of sub £10,000-£12,000.”

Cap HPI said that used car retailers had seen strong consumer demand during February but Yea said that retaining profit margins had emerged as the key concern for businesses as vehicle prices continue to rise.

He said: “The biggest challenges that most retailers currently face are not just replenishing sold stock levels, but also trying to retain workable profit margins whilst remaining price competitive.

“With current trade demand outstripping supply, along with continued strengthening of pricing throughout the month, this has only compounded this issue further.

“Many retailers are reporting that margin compression is still one of their biggest concerns this year, especially if retail advertised pricing is not increasing in-line with current trade and wholesale pricing.”

Just five sectors delivered overall value reductions in February at 3yr/60k-mile, according to Cap HPI data.

They were: Executive, down 0.1%; Large Executive, down 1.4%; Luxury Executive, down 0.6%; Sports, down 0.8%; and Supercar, down 0.9%.

The sector’s top performers, meanwhile, were the BMW Mini Cooper S (18-), which delivered 5.1% value growth, Dacia Sandero (13-), up 1.3% and the Ford Fiesta (08-17), which delivered 2% value rises.

In the alternative fuel vehicle (AFV) arena, Cap HPI said that late ‘plated electric vehicle (EV) product saw pressure in February due to strong offers on nearly new cars with limited mileage with values for the Audi E-Tron (18-), Hyundai Ioniq (19-) and Nissan Leaf (17-) all moving back in the month.

Yea said: "Strong demand has again been witnessed for older electric vehicles with values for some of the mainstream models moving up.

“As disposal volumes reduced, especially around vehicles registered in 2017 for the Nissan Leaf (10-18), values have recovered.

“Also, values have increased for some of the more niche products that sit within this sector. Examples of these are the Nissan ENV200 (14-), Smart FORFOUR (17-19) and Smart FORTWO cabriolet (17-).”

SUV performed well during February, with values rising 1.1%.

However, Cap HPI noted that larger models had generated some significant reductions in value in recent months.                   

Yea concluded: "As we move into March, we are unlikely to see any significant increase in return volumes initially.

“If supply and retail demand remain at current levels, then we expect another stable and possibly positive month for used cars.

"Historically, the used car market in March is generally a stable one with values only moving down 0.1% since 2015, although 2019's reduction of 0.9% does distort the overall average, with 2019 removed the average move is positive at 0.1%.”