The average value of three-year-old used cars has fallen by 2% in August, according to Cap HPI.

The data firm said that after a strong first quarter of increasing values, August marked the fifth consecutive month of reductions.  

It said it was the largest drop seen during August since its Cap Live valuation service was introduced in 2012.

Cap HPI director of valuations Derren Martin said: “August is generally a stable month for used car values due to low supply and steady demand. However, this year, supply is increasing, despite low registrations over the last three and a half years, and demand is more muted than usual. 

“All this comes at a time when values remain inflated from 2021 increases.”

Martin cautioned that the headline figure did not paint a full picture of the market.

He said: “For example, average movements in isolation show that EVs are the second strongest performing fuel type this month, with diesel, petrol and plug-in hybrid vehicles all seeing larger adjustments. The fall of 1.7% is the smallest movement applied to EVs this year.  

“Many models are now seeing adjustments more or less in line with other fuel types of vehicles that sit in the same sector, rather than the big adjustments we witnessed earlier in the year.”

According to Cap HPI, August saw less pressure on values of some smaller and medium EVs, with many of these models hitting an attractive price point in the retail market and encouraging wholesale buyers. However, some heavy reductions have been applied to some more expensive, premium EVs at the one-year, 10,000-mile point.

The supermini sector saw a 2.4% fall, while SUVs fell by 2.1%, with medium-sized models are hit the hardest, particularly where volumes are high and there are multiple examples of similar models.

Martin said: “Overall, with retail and wholesale used markets slightly muted, values have realigned in August. 

“The average is nothing hugely untoward, and certainly no crash, but a relatively strong movement down for the time of year nevertheless.”

Martin said that looking forward, sales channels in the new car market would be interesting to watch during the plate-change month of September. 

He said: “The retail market is subdued, with pressure remaining on household budgets, so it is likely that there will be some attractive offers to consumers, as well as larger volumes being diverted into fleet. 

“Volumes will no doubt increase in the used market accordingly, as part-exchanges and fleet returns appear in larger numbers.  

“The necessity of purchasing used cars will be a constant but at the more aspirational end, will consumer demand be enough to mop up the increased supply?

“As we approach a pivotal month in the automotive calendar, it is more important than ever to track live trade values. As has been evidenced over the course of the EV value drops in the last year, basing buying prices off previously applied retail advert prices can be a dangerous policy in a falling market.”