No cliff edge in sight for used car values, Cox Automotive says
01 August 2022
Author: Sean Keywood
An imminent drop in used car prices is unlikely, despite signs of an end to significant increases in values, according to Cox Automotive.
The data company said this was due to a continuing lack of available new car stock.
The prediction came as Cox announced a downgrade in its forecasts for the used car market for the year 2022. It said the most likely scenario was now 7.05 million transactions during the year - a 4.8% downgrade on its previous forecast, which would represent a 6.4% fall year-on-year, a 4.4% reduction compared with the 2001-2019 average, and an 11.2% fall compared with the most recent pre-Covid performance.
Cox insight and strategy director Philip Nothard said the change reflected a global shortfall of 31 million new vehicles over the past two years, and the resulting supply constraints within the used car market.
He said: "The used car market has been grappling with a shortage of vehicles for some time. This, coupled with high demand, has caused prices to rise to record levels.
"While the sector has become accustomed to fewer vehicles and higher prices, the full extent of the global new vehicle shortfall will have a significant effect in the coming months.
"Challenges exist mostly in the zero to six, and sub-12-month market, although we will soon see more of the same within the one-to-three-year sector, particularly over the next 24 months. Eventually, shortages will trickle down to the late three-year and five-year market."
Nothard said that used car retailers were facing stiff competition for product from new competitors who adjusted their stock profile during the pandemic, such as daily rental companies, who turned to the used market to compensate for the lack of new vehicles.
Cox is therefore expecting prices to remain stable in the short to medium term, although it says a downwards trajectory is inevitable in the longer term.