GOOD news from Cox Automotive is its forecast that the used car market is set for steady improvement for the remainder of 2023.
The automotive services provider sees a recovery based on increasing consumer and business confidence.
Nevertheless, Cox Automotive’s Philip Nothard (above) says it will be relatively slow, with minimal notable shifts in demand or market dynamics. But consolidation and acquisition activities in the wider vehicle industry will positively impact transaction numbers in the used sector, resulting in a more streamlined and efficient marketplace he believes.
Cox Automotive predicts used car transactions for the entirety of 2023 to be 7,154,047 units, a 4% year-on-year increase, but still below (-3%) the average pre-pandemic yearly figure. It forecasts 1,866,540 transactions in Q3, softening to 1,607,517 in Q4.
With various challenges persisting, a more substantial recovery is not expected until early or mid-2024 continues Cox Automotive. Factors including global economic conditions and energy-related issues continue to act as obstacles to overall growth.
Retail pricing remains unaffected by the rise in interest rates and pressures on household expenditure, the forecast adds, maintaining consumer pricing stability.
The global loss of 42 million new vehicles in production has 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.
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.
With reference to the used market for BEV vehicles, Philip adds:
The current state of the electric vehicle market poses a potential risk for the used car sector. While 64% of franchised dealers stocked BEVs as part of their used vehicle inventory in 2022, just 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.
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.
For more detail the analysis is featured in Cox Automotive’s latest AutoFocus insight update, the projections consider a baseline, upside and downside scenario for the used vehicle sector in the remaining half of the year.
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Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
