Wobbly used car values require steely calm, reckons Cox Automotive

Navigating the dynamic landscape of the used vehicle market in 2023 requires a balanced perspective, combining confidence with caution. Fleets and dealers must maintain composure amid fluctuating values. The steadfast used car forecast of 7.15 million remains a guiding beacon. Despite the current realignment of trade prices in the used car market, characterised by unrealistically high figures, a measured approach is encouraged, advocating for stakeholders to stay calm and strategic in the face of value volatility.

Philip Nothard, Cox Automotive’s insight director Tweet

Confidence and calm urged around used values drop
Cox Automotive’s used car forecast remains at 7.15 million
Current trade prices in the used car market, although re-aligning, remain unrealistically high

COX Automotive is advising a cool head and steely nerve as the swing from high RVs to dropping used values has been the key feature of used values in 2023.

Although cap hpi reported October’s biggest single month drop in used values since 2012, Cox Automotive says fleets and dealers should trust the data.

While a downbeat Q4 is anticipated with weak demand and increased supply, Cox Automotive says its 2023 used car transactions forecast of 7.15 million remains achievable. This represents a 4% year-on-year increase, but 3% below the 2010 – 2019 averages.

Philip Nothard, Cox Automotive’s insight director, comments: “Despite current concern about used car values and the impact of this on retail sales, we remain confident in our full year forecast and believe the year will close on 7.15 million used car transactions.

“We anticipated that the second half of the year would be significantly slower than the first. Our view that a softening in consumer confidence combined with a return to the over-supply of new cars, resulting in depreciation levels not witnessed since 2015 and easing transaction volumes, has proved accurate.”

Philip believes the used market is now undergoing a transitional period, as values realign. He argues the importance of reflecting on historical data when evaluating the current situation. Over the past two decades, the UK’s average annual used vehicle transactions stood at 7.4 million, with peaks exceeding eight million only occurring in 2016 and 2017. The ratio of used-to-new transactions averaged 3.37:1, rising to 4:1 during the pandemic-induced pause in new car production.

Current trade values remain unrealistically high despite the recent trade drops. A remarkable four-year period with minimal depreciation has contributed to this trend, with oversupply and the return of discounts, deals and incentives in the new car market creating an unsustainable cost discrepancy.

Philip Nothard, Cox Automotive’s insight director Tweet

Philip added the used cars had become comparably unaffordable coinciding with an easing of demand and the market was adjusting accordingly.

“While this dramatic depreciation will bring about some short-term pain for some, we must remember that over the long-term the sector has enjoyed a period of healthy returns, and we’re now returning to where we ought to be.

Image courtesy of BEN