If you’ve dipped your toes into the used car market recently, you may have noticed that prices are a little steep compared to where they were a year or so ago. According to used vehicle pricing specialist Indicata, used car prices in the UK rose 28% across the first 11 months of 2021 as supply issues impacted – and continue to impact – the new car market heavily.
For the average used car punter, then, there are a few questions. Firstly, why are used car prices increasing so much? Secondly, when can we expect second-hand car prices in the UK to drop? And thirdly, with the above in mind, is now a good time to buy a car?
Here’s a run-through of where things stand right now.
Why are used car prices so high right now?
Used car prices in the UK market have been rising since mid-2020, to the point at which the increase of second-hand car prices has arguably been the biggest automotive trend to span from the pandemic. The problem behind second-hand car prices rising boils down to a simple but very global case of supply and demand, but the factors behind those supply chain issues are wide-ranging and complex.
The main considerations in play are:
- The global chip shortage: one of the biggest impacts on global industry stemming from the pandemic is the overwhelming demand for integrated circuits – used in cars, games consoles, computers and other key electronics – against a failing supply. The increased demand spans from growing remote-working habits, while supply issues are a result of factory shutdowns through lockdowns as well as mass cancellations of orders from manufacturers through the pandemic. For the automotive industry, that has meant a huge dent in new car production amid spiralling demand, meaning that buyers are turning to the used car market in big numbers.
- Used car stock shortages: alongside new car supply issues, used car dealers have also experienced a shortage of stock due to a low number of trades-in during the pandemic. Indeed, many dealers found themselves largely inactive through lockdown, which limited the opportunity for custom and a strong part-exchange market.
- Surprise demand out of lockdown: perhaps one of the more surprising products of the lockdown is the increased financial mobility of many Brits as a result of limited spending through quarantine. Undoubtedly a factor in the similarly soaring property market, the automotive industry was somewhat taken by surprise by the amount of ready-and-willing buyers looking for a new vehicle straight out of lockdown – further straining supply issues.
- Rise of online dealers: the increase of online dealers – such as Cinch and Cazoo - with significant advertising power over the last few years has also placed more of a spotlight on the used car market, with consumers being encouraged to buy a used car more than ever before.
All of the above have contributed to second-hand car prices rising to unprecedented rates, with the AA reporting that some of the UK’s most popular cars have increased in value by 57% since 2019.
Will used car prices drop in 2022?
With used car prices recording five years’ worth of growth in the space of six months through the back end of 2021, the natural question to ask is: when will the bubble burst? Indeed, most used car buyers will be both hoping and assuming that what goes up must come down. However, that may not actually be the reality that lies ahead.
Global automotive services experts Cox Automotive have suggested that second-hand car prices in the UK may never return to pre-pandemic lows. This is due to an ongoing shortage of stock, with the market having lost a projected 1.4m vehicles through the crisis via limited new car sales and reduced activity in the fleet and lease sectors across 2020 and 2021. Because of this, it’s likely we’ll see a notable shortage of two- to three-year old stock in the next couple of years, which in turn will have a knock effect in values of the cars that are available.
As a solution, used car retailers may look to fill their forecourts with older stock to make up for the upcoming shortfall – by no means an ideal solution for buyer or seller, but one that may offer a pricing stop gap while new car, fleet and lease registrations recover. With the recent arrival of online disruptors such as Cinch and Cazoo increasing customer focus on second hand sales, it’s certainly interesting times in the used car market for both dealers and customers.
On a more positive note, projections from Cox and other sources suggest that the market is set to soften in 2022 – it’s just a case of when that will be. According to vehicle valuation specialists Cap HPI, there will be no “seismic” shift in used-car values in the first quarter of 2022 as limited supply and strong demand remain in the new year. Cap HPI’s Head of Valuations, Derren Martin, has predicted that used-car values will stay roughly where they are until the summer at least.
Is now a good time to buy a used car in the UK?
All of the above presents an interesting dilemma for those looking to buy a used car in the coming months. So, is now a good time to buy a car in the used market? There are a few things to bear in mind when answering that question.
Firstly, the contributing factors to current used-car rates are set to remain for some time to come. As discussed above, stock shortages are set to continue alongside high demand, while the global chip shortage is expected to extend into 2023.
Secondly, it is still possible to find cheap used cars for sale in the UK, depending on what you’re looking for and where you’re looking. Unsurprisingly, it’s popular mainstream models that have seen their price increased the most over this remarkable period. For those buying outside of the standard commercial market – for example, in the luxury car segment – it’s likely that any price rises won’t have hit as hard.
Thirdly, for those part-exchanging, now is as good a time as any to pull the trigger on a purchase. Today’s used car market is undeniably a seller’s one – but that means that buyers using their old vehicle as collateral will get more or less the same deal now as they will in a softer market, as prices will soften on both sides in due course.
With used car prices set to remain roughly as is for the next six months at least, many speculative buyers will feel that’s too long to wait to secure their new vehicle – particularly with no guarantee of sizeable price drops in the second half of 2022. With the part-exchange market strong and cheap deals still to be found outside of the mainstream channels, it’s likely that many buyers will still pull the trigger on a second-hand purchase in the coming months.
Find a great deal on a luxury car with Jardine
With over 50 years’ experience in the new and used luxury car market, we’ve always looked to couple great service with fair prices on an outstanding range of luxury vehicles. Today, we’ve got plenty of models in stock from some of the very best manufacturers in world – and, with part-exchange options available to all customers, a great deal on a luxury car could be just around the corner.
To get started, book a virtual appointment with us today or visit your nearest Jardine dealer to see what we’ve got to offer.
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In the U.S., the Manheim Used Vehicle Value Index — which measures the prices dealerships pay for used cars at auctions — hit a high of 257.7 in January 2022 and has since fallen to 222.5 in January 2023. Overall, J.P. Morgan Research predicts used car prices will decline by roughly 10% in 2023.Why are used cars so much more expensive right now? ›
With the limited production and availability of new vehicles, private sellers and dealerships are searching for more used vehicles to supplement their inventories. As the demand for used vehicles grows and supply dwindles, the price of the available used cars continues to rise.Should I buy a car now or wait until 2023? ›
Our analysts tell us that new car shoppers are better off waiting for discounts to kick in in the second half of 2023. Falling used car prices make it a good time to buy used. Even as new car prices begin to drop, they remain elevated.Will prices of cars go down in 2023? ›
Prices could drop up 5% for new vehicles and 10% to 20% for used vehicles in 2023, according to a report in November from J.P. Morgan. The basis for the prediction is that demand has stabilized and vehicle inventory is improving.Will used car prices ever go back to normal? ›
Although used car prices are finally starting to decline, it could be years before the market returns to a pre-pandemic normal. A recent study conducted by the car insurance comparison site Jerry found that the used car market won't recover in the foreseeable future.Which brand of vehicle is the most reliable? ›
- Lexus: 133.
- Genesis: 144.
- Kia: 152.
- Buick: 159.
- Chevrolet: 162.
- Mitsubishi: 167.
- Toyota: 168.
- Hyundai: 170.
Based on recent industry data, the prices that car dealers pay wholesale for used cars dropped 14.9% during 2022, which means consumers should also start seeing lower prices on the lot. Money expert Clark Howard also predicts the conditions will continue to improve gradually each month throughout 2023.Are used vehicles overpriced right now? ›
From 2019 to 2022, used car prices went up over $13,000 for a Toyota Avalon and over $12,000 for a Chevy Traverse, according to data from ISeeCars. “You can't keep having car prices go up. At some point, they get priced out of the average consumer's budget and they just stop buying,” Brauer said.Why are cars so expensive now 2023? ›
New-car prices have risen because of increased costs of raw materials and shortages of chips for computers that control a vehicle's gas pedal, transmission and touch screen. The rise in new-car prices has fueled the demand for less expensive used vehicles, according to J.P. Morgan.What is the best month to buy a car? ›
Best seasons to buy a car
The time around the New Year, in particular, is regarded as a good time to buy since it benefits from the end of monthly, quarterly, and yearly cycles, falls around a holiday, and you can still find some of last year's models at deep discounts.
Paying cash for your car may be your best option if the interest rate you earn on your savings is lower than the after-tax cost of borrowing. However, keep in mind that while you do free up your monthly budget by eliminating a car payment, you may also have depleted your emergency savings to do so.Is it an OK time to buy a car? ›
While soaring used car prices are bad for those who can't afford a new car, they may mean 2022 is a good time to buy a car for those with a vehicle to trade in. A high trade-in price means added capital that can help reduce the finance share of purchasing a new car.How much will the car be worth after 5 years? ›
After one year, your car will probably be worth about 20% less than what you bought it for. AFTER FIVE YEARS: After that steep first-year dip, that new car will depreciate by 15–25% every year until it hits the five-year mark. So, after five years, that new car will lose around 60% of its value.What cars will be worth alot in future? ›
- Ford Mustang Shelby GT500 - 64.2 Percent.
- Porsche 718 - 61.7 Percent.
- Chevrolet Corvette Stingray - 61.2 Percent.
- Porsche 911 - 58.3 Percent.
- Dodge Challenger - 57.0 Percent.
- BMW M3 - 55.3 Percent.
- Dodge Charger - 54.3 Percent.
- Subaru Impreza - 53.6 Percent.
- “I'm ready to buy now.” ...
- “I can afford this much per month.” ...
- “Yes, I have a trade-in.” ...
- “I'm only buying the car with cash.” ...
- “I'm not sure…which model do you think I need?” ...
- “Oh, I've wanted one of these all my life.” ...
- “I'll take whatever the popular options are.”
The report found that Lexus and Toyota make the most reliable cars, while Jeep and Mercedes-Benz make the ones you can depend on least.What is the #1 most reliable car? ›
- 2023 Toyota Corolla Hybrid.
- 2023 Lexus GX.
- 2023 Mini Cooper.
- 2022 Toyota Prius.
- 2022 Mazda MX-5 Miata.
- 2023 Lincoln Corsair.
- 2023 Toyota Corolla.
- 2023 Subaru Crosstrek.
The median new-car price among Cars.com dealers was approximately $42,500 in December — a 10% increase from December 2021 and 18% higher than December 2020.Why aren t used car prices dropping? ›
One of the major drivers of the enormous increase in used car prices over the last two years has been supply chain issues that have limited the stock and delivery of new vehicles. Many predict that the vehicle chip shortage – perhaps the most pressing of the auto supply chain problems – will continue through 2023.Will car prices drop in 2025? ›
“Over the course of the next two years, we're going to see used car prices retreat back to more normal levels. So by the time we get to 2025, that's really when used prices will bottom,” J.D. Power's Paris said. And even when prices do “bottom out,” they aren't likely to return to pre-pandemic levels.
Traditionally, the end of the year can be a good time to find a deal on a new or used car, and you can still save some money with time and effort. However, car buyers may not get the same savings in 2022 that they usually see due to a few factors impacting car prices and monthly payments.What is the cheapest month to buy a car? ›
According to Edmunds data, December has the year's highest discount off MSRP — 6.1% on average — and the highest incentives. Automakers and dealerships want to close the year with strong sales. They also want to get rid of the prior model-year cars that are taking up space, so they're motivated.What is the best day of the week to buy a car? ›
Mondays. Monday can be the best day of the week to buy a new car. Other potential shoppers are often at work, so representatives at car dealerships are focused on anyone who comes in the door.What month do 2023 cars come out? ›
Traditionally, new model year vehicles start to come out in the fall of the previous year. For example, a 2023 model will debut in the fall of 2022 — and dealerships usually want the old stock gone before the new model arrives.Why do car dealerships want you to finance instead of paying cash? ›
A new trend we've seen since vehicle shortages started is dealers not accepting cash or even your own financing when buying a new vehicle. The reason? Dealerships make money financing cars. With far fewer vehicles to sell, they want to maximize every dollar of profit, so some will not take your check.Is it smart to pay off your car? ›
The bottom line
Paying off a car loan early can save you money — provided the lender doesn't assess too large a prepayment penalty and you don't have other high-interest debt. Even a few extra payments can go a long way to reducing your costs.
The most efficient way to pay for your vehicle is to bring a cashier's check, which is more secure than a personal check, and guarantees that the funds are actually available.How long should you expect a car to last? ›
A conventional car can last for 200,000 miles. Some well-maintained car models will reach 300,000 or more miles total. The average passenger car age is currently around 12 years in the United States. Choosing a well-built make and model can help extend your car's longevity.How many years should I buy a car? ›
Many experts recommend a five-year loan or less if you can make it work. While a longer term might get you a lower monthly payment, your cost to own the vehicle will likely be higher based on interest paid over a longer length of time.How many months should it take to buy a car? ›
This is why Edmunds recommends a 60-month auto loan if you can manage it. A longer loan may have a more palatable monthly payment, but it comes with a number of drawbacks, as we'll discuss later. The trend is actually worse for used car loans, where just over 80% of used car loan terms were over 60 months.
For example, a 2023 model will debut in the fall of 2022 — and dealerships usually want the old stock gone before the new model arrives. But that doesn't always work out. And if a 2022 model is still on the lot when a 2023 model arrives, dealerships will usually offer heavy discounts on the older model to sell it.What will happen to cars in 2025? ›
By 2025, 25% of cars sold will have electric engines, up from 5% today. But most of those will be hybrids, and 95% of cars will still rely on fossil fuels for at least part of their power. That means automakers will need to make internal combustion engines more efficient to comply with new standards.What will my new car be worth in 3 years? ›
After two years, your car's value decreases to 69% of the initial value. After three years, your car's value decreases to 58% of the initial value. After four years, your car's value decreases to 49% of the initial value. After five years, your car's value decreases to 40% of the initial value.What will the car market look like in 2025? ›
-- In 2023, the total volume of used vehicles expected to flow through the wholesale market to retailers and buyers is projected to be 31% lower than it was in 2019. “In 2025, it will still be 22% lower, representing a shortfall of about 4 million vehicles that year alone,” the Jerry study noted.