Used car prices took a steep nosedive in October, sending shockwaves through the automotive industry. According to experts, the average value of a three-year-old car with 60,000 miles on the clock fell by a substantial 4.2%. This drop is equivalent to £850, marking the most signficiant fall since May 2011, over a decade ago.
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Is winter is coming for the car industry?
Derren Martin, the director of valuations at cap hpi, outlines his thoughts on this remarkable month. He described it as a ‘fascinating month’ for the market, where prices were greatly affected. While used car prices had remained high in previous years, there was no denying the substantial reduction in value seen in October. In the past decade, such sharp monthly drops were rare, occurring only in November 2014, May 2019, and November 2020. The drop in October 2021 now claims the title of the largest fall ever recorded in October.
In the span of just seven months, since April, car prices have collectively plummeted by 13.6%. This sudden drop follows three years of skyrocketing rises or previously unseen stability in the used car market.
Despite this significant drop, however, it’s worth noting that market prices for both petrol and diesel vehicles remain close to 20% higher than they were at the beginning of 2021. So, while this is a significant realignment, it does not yet constitute a full-blown crash.
The drop is different in different parts of the market
The impact of the price drop was felt across various fuel types. Petrol cars took the hardest hit, with their values dropping by an average of 4.6%. Diesel cars weren’t far behind, experiencing a 4.0% drop. Hybrid cars saw a decline of 4.1%, while plug-in hybrids experienced a slightly milder drop of 3.9%.
In contrast, electric vehicles (EVs) were the most stable, with an average drop of only 2.4% in October, equating to around £650.
Convertible and coupe cabriolet cars saw the sharpest declines, with values plummeting by 5.4% and 7.0%, respectively. On average, this equated to over £1,300 lost on a three-year-old vehicle. These niche car types typically experience seasonal fluctuations, but this time, concerns about the cost of living and rising insurance premiums worsened the drop.
In terms of volume, SUVs, the largest sector, experienced a similar fate, with an average value drop of 5.0% in October, amounting to over £1,000. This trend further underscores the significant shifts occurring in the used car market.
What’s on the horizon?
Experts like Derren Martin anticipate that supply into the market will continue to increase as manufacturers fix previous supply constraints and put effort into regaining market share.
The used car market has witnessed an unprecedented decline. While this significant realignment has sent shockwaves through the industry, experts believe it’s part of a broader shift rather than a crash.
As we navigate the uncertain terrain of the used car market, it remains to be seen how further supply, consumer demand, and economic factors will shape the landscape in the months ahead. Car dealers and consumers must adapt to this evolving market as they continue to buy and sell vehicles.