Currently reading: Experts warn of used car supply constraints after buoyant 2023

Second-hand car market grew 5.1% last year but concerns are being raised over "scary" supply outlook

Used car sales rose for the first time in two years, as a buoyant UK market bounced back following a 2022 hampered by supply issues.

However, concerns have been raised over the volatility of the overall market by industry experts, who predict supply constraints will arise as a result of lower new car production post-Covid  – and a cost of living crisis that has slowed private sales.

Figures from the Society of Motor Manufacturers and Traders (SMMT) reveal that the market grew by 351,915 (5.1%) in 2023, with 7.2 million transactions taking place.

Of those, more than 118,000 were electric cars, a rise of 90.9% on 2022, resulting from the bottoming out of prices in the latter stages of the year.

Despite this boom, the immediate worry is demand outstripping supply. “We’ve come out of a Covid period which saw a new car market that was not as big as it would normally be,” Stellantis’s UK sales vice president Eurig Druce told Autocar Business Live’s latest webinar, “so, fundamentally, supply in the used car market over the next two to three years is going to be below where it has been historically.”

Philip Nothard, insight director at Cox Automotive – which produces market forecasts, raised concerns on the supply of ICE models, especially as this is where demand is highest: “As we move to more positive demand and appetite from retailers that begin to stock up again to their normal levels, that product [supply] will start to dry up, particularly in the zero-to-four-year-old products, and particularly in the non-BEV, petrol/diesel product

“So, we’ve got to be very clear that the vehicles that are entering the used vehicle parc in that bracket are getting slimmer and slimmer. There are some scary numbers that you are starting to look at in that marketplace.” 

This concern is exacerbated by the market being dominated by ICE car sales: 94.3% of 2022’s total used sales were either petrol (4.1m) or diesel (2.7m) cars.

Additionally, the government’s push to make manufactures sell more electric cars, through the ZEV mandate (OEMs must sell 22% EVs this year), could stifle ICE supply further, said Druce.

However, he added that “those who hit these [required] numbers the quickest will be able to unlock ICE car sales first” therefore sending more combustion-powered models into the used car market.

This high demand for used combustion cars is also down to suppressed demand for electric cars, which made up just 1.6% of total used car sales in 2022 – seen partly as a result of the government’s decision to push back the ICE car ban to 2035.

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It is hoped that, as EVs become more common (they made up a much more significant 19.7% of 2023’s new car market), more will begin to trickle down into the used car parc, allowing for used ICE car supplies to be freed up.

Calls have been made to boost demand for new EVs up (therefore helping the used market) by bringing back incentives. SMMT boss Mike Hawes has been one of the most vocal supporters, saying: “The demand is there, but to sustain it we must enable every motorist to make the switch.”

Druce backed this point, especially in the context of small cars, such as superminis, which remained the most popular car type in the UK last year, both in the used car market (32.1% of total sales) and new car market (29.8%). 

“The cars that are selling today are the small cars, and they are the ones that need to transition to electric and the incentives need to show that,” he said. "Big EVs are not the ones to take us forward.”

However, Robert Forrester, boss of Vertu Motors, one of the largest automotive retailer groups in the UK, advised caution: “If you have discounting on new cars, this does have a knock-on effect on used cars, as those used cars have to be cheaper.

“If you’ve got 0% [interest rates] in the new market, and 11.9% in the used market, people will switch from buying used cars to new cars, which dampens demand and can have an impact on used car values.”

This brings another issue to the fore: affordability. Crucial to sustaining the used car market are part-exchanged cars, and if used car prices are too high, no one will look to trade in their car, meaning further fresh stock issues for the car parc, said Forrester.

“As we look at the private car market, which generates those part-exchanges into our used car operations, if volume is going to be muted, like it looked like [it will be], then retailers will have to go into the wholesale market and buy from fleet companies and I think that could lead to quite robust pricing – something which we are starting to see,” he added. “Finding stock could become more interesting.”

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The added uncertainty over the market, he says, compounds stock issues further as “you don’t want too much stock if you don’t know what is going to happen” so “retailers are running quite light on stock, generally”.

Forrester was, however, optimistic in his outlook on used car affordability: “Demand, actually, for new cars is very robust, even though we’ve got high interest rates. When these come down, as we expect they will, over the year, this will make used cars more affordable.”

Will Rimell

Will Rimell Autocar
Title: News editor

Will is Autocar's news editor.​ His focus is on setting Autocar's news agenda, interviewing top executives, reporting from car launches, and unearthing exclusives.

As part of his role, he also manages Autocar Business – the brand's B2B platform – and Haymarket's aftermarket publication CAT.

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