The used car market has made a “steady but unspectacular” start to the new year, revealing changing dynamics as external forces come into play. 

Average values climbed back to pre-Christmas levels in January and February, but BCA says the strong performance typically seen in the early weeks of the new year has simply not materialised

While average values climbed back to pre-Christmas levels in January and February, according to BCA’s latest data, it says the strong performance typically seen in the early weeks of the new year has simply not materialised in 2022. Instead, consumer demand is being affected by external economic pressures and the much-debated cost-of-living squeeze. 

Used car values averaged £10,025 in February 2022, down from the £10,120 average value recorded during January. Demand remains reasonably robust for vehicles in retail condition, but not so for vehicles with cosmetic or mechanical issues. And conversion rates have come under pressure as a result in recent weeks.  

Average monthly values are well ahead year-on-year though and were up by 22% in February. But this compares to the lockdown conditions in place a year ago, which impacted demand across the automotive sector for the first few months of 2021.  

COO Stuart Pearson commented: “The market has experienced a range of conflicting economic signals in recent weeks, with the good news as Covid-19 restrictions were lifted being cancelled out by rising interest rates, a cost-of-living squeeze, energy and fuel price increases and now the uncertainty caused by the tragic events unfolding in Ukraine. Unsurprisingly, we haven’t seen the usual seasonal market bounce during the first quarter and – while levels of demand remain steady – these macro-economic issues are definitely influencing consumer behaviour and retail demand.” 

He added: “At the sharp end of the used car business, BCA Valuations has seen some significant movements at a number of value points and segments during February which are unlikely to be surfaced in the overall “headline movement” that will be reported by the price guides as we move into March. We therefore run the risk of the market becoming frustrated in March if buyers are presented with stock that appears to be valued several percentage points above their expectations. This is not an unusual dynamic; however, it is unusual to experience this at this time of year.” 

Pearson explained that this would be a more difficult scenario to navigate if the market were being flooded with stock, but new car supply still remains challenging for a number of brands. 

He also reminded sellers of the “remarketing basics” as dynamics change: including a data-driven approach to both mechanical and cosmetic repairs, along with focusing on the right level of preparation, an accurate appraisal, being transparent around vehicle provenance and declaring spare keys.   

Pearson concluded: “There has been a safety-net of rising values and very strong demand for many months and it is easy to forget just how good, but unusual it has been. It is time for the sector to get back to basics, use all of the relevant data points to inform pricing decisions and be decisive as tomorrow’s price is unlikely to be better than today’s.”