The used car market is currently experiencing a period of uncertainty, a direct consequence of supply and demand dynamics influenced by the production of new cars. The COVID-19 pandemic significantly disrupted the manufacturing of new vehicles due to a shortage of semiconductor chips, reducing the supply of new cars. This scarcity drove an exceptional demand for used cars, pushing prices to unprecedented levels.
As manufacturers have begun to recover and ramped up new car production, the supply has started to meet demand once again. This shift has resulted in a significant correction in the used car market, with prices for used vehicles experiencing a huge decline. Retail prices for used cars have seen a massive drop, particularly in the last 5-6 months, with average price reductions ranging between £1,000 and £1,500. Certain models, such as Land Rovers, have faced even steeper declines, partly due to unique challenges such as insurance issues related to their high theft rates in the UK.
Trends and Predictions
Expert opinion within the industry suggests that the current price adjustments have largely stabilised. It is expected that by mid to late 2024, we will witness a gradual increase in used car prices due to the lingering effects of the new car production gap during the pandemic. This rise, however, is unlikely to reach the heights seen during the COVID-19 crisis but will represent a moderate recovery before prices settle once again.
We also predict a further upward trend in used car prices around 2025 and 2026. This anticipated increase is attributed to the ongoing shortage of semiconductor chips, which continues to limit the production of new cars.
Opportunities for Buyers and Sellers
This unique market situation presents opportunities for both buyers and sellers. For buyers, the current period may be the ideal time to invest in a used car, especially models that are 2 to 5 years old. German cars, in particular, are recommended for their better value retention compared to other brands. With dealerships experiencing quieter sales periods, competitive pricing is more likely, offering the potential for even further savings. For those considering selling their car, private sales are advised to maximise return, although trade-ins still offer favourable rates compared to historical norms and are more hassle-free.