January providing reasons to be cheerful for used car values

Average used car values have suffered a continuous decline dropping more than 22% since their peak in March with almost half of that occurring in the last three months, reports auction house BCA.

In December, the average value of used cars at BCA was £6,918, marking a £315 (4.4%) decrease from November's figure of £7,223. The persisting pressure on used car values is evident in a further 2.2% decline in December.

Throughout the second half of 2023, average used car values underwent a noticeable realignment, influenced by broader economic factors impacting retail activity. The increased availability of new cars and manufacturer incentives has also played a role.

The stock mix saw a decline, with a shortage of 3 to 4-year-old vehicles compensated by a higher volume of older, lower-grade vehicles entering the market, further affecting average values.

Stuart Pearson, BCA's chief operating officer, noted the challenging nature of the last quarter of 2023, with various factors contributing to the slowdown in retail: “Buyers were caught in a dilemma of whether they should ‘stick or twist’, however a number actively took advantage of significantly lower prices in December to refresh their forecourts and have been realigning their existing stock on a weekly and often daily basis.” 

Despite the challenges, BCA reported positive sales performance between Christmas and the New Year, while other auction operators remained inactive. Sales during this period saw conversion rates exceeding 90%, with strong buyer competition for stock.

Pearson noted that while there has been ongoing pressure on used car values, they have now shifted to levels not far from those seen in pre-pandemic times.

Considering the economic challenges in the UK during 2023, including high inflation and a cost-of-living crisis, he said the potential peaking of various factors could support an uptick in retail activity and greater stability in used vehicle prices.

Looking ahead, Pearson expressed optimism based on increased activity in the first week of online auctions in 2024 and noted a level of optimism among the customer base which suggested the potential for a more stable month.