Second-hand car values will crash in the coming year, according to one car finance chief.
Values of used models have been soaring for the last 18 months but one industry observer claims that a “market correction” will see values fall dramatically in the new year.
NIck Zapolksi, founder of ChoosemyCar.com, believes that changes in vehicle supply levels along with economic uncertainty and soaring fuel costs could be set to dampen the current demand, a view challenged by some others in the industry.
New figures from Auto Trader show that used car prices have jumped 25% in the last year and soared almost £3,000 in the last five months alone as new car sales have struggled.
Some used models are now selling for more than their brand-new equivalents due to problems securing new stock caused by a global component shortage.
Demand also soared in the first half of this year, although the latest SMMT data shows a 6.2% decline in used sales in the third quater of the year.
Mr Zapolski is predicting a “perfect storm” of factors including rising household bills and employment concerns that are causing confusion and uncertainty among buyers and will slow demand further in coming months.
He said: “In my opinion, we’re smack bang in the middle of an automotive mini-recession. The threat of yet another lockdown and potential job losses, combined with huge increases in not only car fuel but energy bills, means that many people are taking a pause on making the decision to buy a car.
“Used cars prices are artificially high due to lack of stock filtering through new car sales, due to shortages of the semiconductor chips. When chip production gets back on track, we will see the return of new cars entering back into the market and this will refresh used car stock levels.”
He said that high fuel prices were also affecting buyers’ considerations, adding: “All of this together leaves consumers very confused and uncertain as to what to do. The result is less purchasing, less demand, and therefore less value on used vehicles. We’re predicting a huge drop in prices next year.”
However, the UK’s biggest vehicle marketplace said the current surge in used values showed no sign of slowing down anytime soon.
Richard Walker, Auto Trader’s director of data and insights, said: “Looking ahead, demand will continue to be fuelled by healthy levels of consumer confidence, a positive shift towards car ownership, and the 1.5 million ‘lost’ car sales in 2020.
“Add to the fact it’s unlikely we’ll see a strong return on supply levels due to the fall in new car sales volumes over recent years and the lower levels of pre-registration, we can expect strong year-on-year price growth to continue well into next year.
“Although we may see some slight week-on-week softening as a result of typical season trends, for year-on-year growth to slow to the low single digit levels we saw pre-pandemic, supply and demand levels will need to even out. From what we’re seeing in the market, the wider economy, and the hundreds of thousands of daily price observations we’re able to track across the live retail market, there’s simply no evidence to suggest that will be anytime soon.”