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The UK used car market should see a period of stability in 2023, according to the latest forecast from Cox Automotive.
The data firm said its latest baseline forecast for next year was for 7.07 million used car transactions, which would represent a 2.8% year-on-year increase.
However, this would still be 4.1% down on the 2001-2019 average, 10.9% down on the figure for 2019, and represents a 5.8% downgrade from Cox's previous forecast.
The company is projecting this to follow on from a baseline forecast of 1.59 million transactions for the final quarter of this year, which would be a 3% year-on-year decrease.
Its baseline prediction for the first quarter of 2023 is for 1.76 million transactions, which would be a 0.5% year-on-year fall.
Cox, which issued its latest forecasts in its latest AutoFocus newsletter, said that the low-supply, high-demand dynamics that have affected the market for close to three years now were set to continue, alongside expected pressure on consumer purchasing power and rising operational costs for retailers.
It said that although the vehicle supply situation had improved compared with 2021, it was still some way off pre-pandemic levels.
Cox insight and strategy director Philip Nothard said: "The question remains - how much will consumer demand be weakened by the cost-of-living crisis, rising interest rates, and the willingness to purchase big-ticket items such as cars? Unfortunately, it's impossible to predict the extent of this today."
Although consumer confidence may dip, Cox does not believe this will be to a level significant enough to create an oversupply of used car stock.
It believes that used car values, although under increasing pressure, will remain at their current inflated levels for some time to come.
Nothard said: "There is extreme volatility as product becomes available and constraints return; used prices have plateaued as a percentage of the cost of new, but make no mistake, these values are still very high and unsustainable in the long term.
"Used vehicles are perpetually depreciating assets; unprecedented rises, even to levels close to or above the original cost of purchasing new, will always come back down, so the question is when will seasonal depreciation return, and to what extent?
"For now, retailers can rest assured that residual values will remain reasonably stable until at least 2024, given the current economic climate and limited new car supply."
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