Used car market to soften in second-half of 2022, predicts VRA

Lower volumes of stock and longer vehicle retention will lead to a softening in the used car sector in the second half of 2022, the Vehicle Remarketing Association (VRA) says.

Philip Nothard, VRA chair – reporting on the trade body’s latest member meeting which took place at BCA Birmingham last week – said that its members expected the market to remain relatively strong but that “significant difficulties” remained and were likely to have an increasing effect.

He said: “The used car sector has been at or near to a peak in terms of values and prices for a considerable period of time and, while it is almost certainly now past its highest point, it remains in a relatively good place.

“However, the general economic backdrop is worsening and could degrade quite quickly during the second half of the year and that is likely to have an impact in all kinds of ways but most notably on consumer confidence, with the cost of living crisis becoming an acute problem for many.”

Nothard said that this would have a direct impact on the market with many private car owners choosing to hang onto their existing car for longer because their personal finances had been hit, which will likely cause a softening of demand.

He added: “This reduction in demand could also be accompanied by a further fall in vehicle supply, prompted by a new vehicle market that is not really improving in terms of the numbers of units available because, even though the semiconductor situation is beginning to ease, new factors such as the situation in Ukraine have come into play.”

VRA members reported a change in the badge mix of the used car sector, in response to the availability of vehicles from particular manufacturers during the pandemic.

Nothard said: “Manufacturers who have been able to supply new cars in quantity over the last 2-3 years have often been different from the traditionally dominant market players, and we are starting to see this feeding through into the car parc. The brand and model mix on some forecourts and web sites is noticeably different from pre-Covid.”

He added that perhaps the key lesson of the used car market since the start of the pandemic had been that predictions by experts were often confounded.

“To a greater extent, the last few years have taught commentators that their powers of crystal ball gazing are limited. The predictions we made about the used car market at the start of this year have already been superseded by unforeseen events such as the Ukraine war, and this could well happen again in the second half of 2022,” Nothard concluded.

From April to the beginning of May 2022 used car prices fell by 1.4% and are now 0.1 percentage points lower than the start of January.

At auction, BCA said average used car values have fallen from a September high of £12,000 to £8,552 in April. Values have settled steadily over the first four months of 2022, with guide price performance moving from 99.0% in January to 94.8% in April.