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The UK used car market is set for modest growth in 2023, according to Cox Automotive.
However, the data firm said that economic pressures would hamper the market from reaching its full potential.
It has made a baseline prediction of 7,096,932 used car transaction in 2023, which would be a 3.2% improvement on 2022, and also represents an increase on the 7.07 million it predicted last November.
However, it warned that expected gains in Q1 of this year were marginal, at 0.9%, although it believes that replenished stock levels and renewed fleet utilisation will contribute to improvements.
Cox has also issued a best-case scenario prediction of just over 7.5 million transactions, and a worst-case prediction of just under 6.9 million.
It said that while vehicle supply was improving as more fleet and leasing companies renewed fleet utilisation priorities, pressures on consumer spending, increasing new vehicle supplies, and weakening margins caused by product overage were all impacting sector fortunes.
In addition, it said the sector was continuing its post-pandemic recovery, with more than 46 million vehicles having been lost over the past three years due to production and supply issues, the effects of which would be long-lasting.
Cox Automotive insight and strategy director Philip Nothard said: "We must remember that the used vehicle market is still in a peculiar time. Although there are signs of weakness with cautionary buying, increasing overage, and weakening consumer demand and confidence, this is all against the heights used vehicle values achieved over the past few unprecedented years.
"We are entering a period where supply will improve, but consumer demand is expected to decline further, exacerbated by the cost-of-living crisis. As such, retailers will once again need to be creative.
"For example, tactical registrations and discounting could become popular strategies as margins weaken and product overage increases."
One segment likely to be affected by turbulence, according to Cox, is used EVs, since despite manufacturers shifting strategies to improve EV supply, it said many still considered ownership costs prohibitive.
As a result, it said there was increasing caution and risk for residual values of EVs, resulting in above-market depreciation movements on those models, and derivatives either in significant oversupply compared to market demand or not on a buyer shopping list.
Nothard said: "As some leasing companies review strategies for their electric vehicle fleets, others may choose to delay that transition due to uncertainty. But, as we have observed over the decades with combustion engines, given time, the supply, demand, and residual value uncertainties will settle and find their place in the market."
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