Used car values suffered their biggest monthly fall in 12 years in October, hurting car retailers and threatening to drive up finance costs for new cars.
Values of three-year-old cars slumped 4.2% in the month, equivalent to a drop of £850 on average, according to the latest Cap HPI report. “There is no escaping that this is a considerable reduction in value,” the report concluded.
Used car values have now fallen 14% since April following an unprecedented spike during the Covid aftermath, when new cars become tough to get hold of, Cap figures show.
The drop has pushed used car supermarket Motorpoint to a loss for the six months to the end of September after a run of profits, the company reported on Thursday.
“The rapid fall in used car values is unquestionably a near-term challenge,” said Mark Carpenter, CEO of Motorpoint Group, in a statement.
Motorpoint lost £3.7 million in the six months to the end of September, after revenue fell by 23% to £607m. The loss was partly exacerbated by the fall in gross profit from £1373 to £1267 on cars sold through its 20-strong network of supermarkets. The company made a profit of £2.4m in same period last year.
The used car market has been badly impacted by the combination of high inflation, high interest rates and consumer uncertainty, Motorpoint said in an investor presentation.
The hesitancy of buyers to splash out on car purchases has coincided with more used car availability as car makers overcome manufacturing bottlenecks and production returns to normal. “The current environment is likely to be volatile as new car supply into the used car market begins to increase,” the presentation said.
Despite the dramatic recent fall in values, used cars are still relatively expensive due in part to the spike in new car prices, which is putting off consumers.
Motorpoint gave the example of a three-year-old Hyundai Tuscon 1.6 SE, which sells for £16,999 now compared with £11,999 in 2021. The additional £5000 meant that monthly PCP costs have gone up from £220 a month to £329, impacting demand as consumers look to tighten their belts.
SUVs were particularly badly hit by the drop in values, according to the Cap data for October, with a higher than average fall of 5% for a three-year-old model. Worst hit was the Mitsubishi ASX, down 13%, while the Suzuki Vitara, Vauxhall Grandland, pre-facelift Jaguar F-Pace and Skoda Karoq all dropped by around 11%.
MPVs and city cars were the least badly hit, falling by an average of 2.4% and 2.8% respectively. “City cars in particular remain the most likely cars for independents [sellers] and car supermarkets to take a chance on stocking,” the Cap report said.
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