Used car prices are expected to stabilise in 2024 following a turbulent end to this year, as the market’s period of strong post-Covid values came to an end. 

Wholesale trade prices fell by 4.2% both in October and November, according to Cap HPI. In an announcement on 6 November, the firm cautioned that the market was moving “very quickly” and said values had fallen a further 1.5% in the 10 days since its 27 October update but described the overall move as a “realignment” after a prolonged period of inflated used car prices, which first started to soften in April. 

Dealers and others disagreed with Cap’s assessment, and there were heated exchanges on social media centred on the discrepancy between wholesale price drops and, at the time, the comparative strength of retail values. 

“The headline figure doesn’t tell the whole story,” said Philip Nothard, insight director at Cox Automotive. “At times of realignment, you get a lag. That’s because you have a period of time where retailers are trying to manage their way through the [pricier] stock.” 

He said this typically involved dealers making less profit on older used car stock and gradually adjusting the price of fresher models until the correlation between wholesale and retail prices synced up. 

Nothard claimed pockets of the market were doing better and worse than the data suggested, with cheap used cars buoyed by the cost of living crisis and aggressive new car sales targets hitting newer, more expensive models hard.

He said: “If you’ve got a sub-six-grand car that’s retailable, the market can’t get enough of them [but] we’re now in a position where you can buy a brand-new car, and there are a lot of incentives – a lot of dealer contributions – and some of the manufacturers are putting on a lot of pressure.”

Cap’s head of forecast strategy, Dylan Setterfield, said this was due to regulatory burdens on manufacturers to register higher-emitting models before the end of 2023.  

He said: “We think there’s going to be quite a bit of forced registration activity by the manufacturers in December… There will be some looking at Cafe [corporate average fuel economy] regulations, there will be some looking forward and thinking about the zero-emission vehicle mandate coming in January. They may want to make sure they’ve got all their high-CO2 cars registered in 2023 instead of 2024 [and] they may want to hold electric vehicles into January.”

Lower demand for pricier used cars coincided with an increase in leasing company defleets, themselves driven by greater availability of new models and a keenness to shift ageing vehicles. Though leasing companies made less money on used cars in late 2023 compared with earlier in the year, prices were still proportionately higher than the original residual values set when the vehicles were new, which meant they generally avoided losses. 

“They’re looking at what they had as a residual value on that car in 2020, and it’s ‘oh, I’ve got £5000/£6000/£7000/£8000 to play with’,” added Setterfield. “It is a lot easier for them, in that situation, to accept lower bids for cars, and I think that’s one of the reasons why we’ve seen a much bigger drop than you’d normally expect in exactly the same situation any other time.”

Nothard predicted the used car market would end up with average depreciation of around 17.7% in 2023. For context, he said seasonal average depreciation between 2005 and 2023 was 11%, according to Cap data; that around 10-15% is generally considered normal; and that the 2008 financial crash created a 34.6% fall.

Experts suggested the 2024 used car market would see more typical, pre-pandemic seasonality and depreciation levels. Citing anecdotal conversations with trade buyers, Shoreham Vehicle Auctions managing director Alex Wright said buying bans contributed to the slow end to the year, but was confident the market was in for a good start to 2024. 

He said: “Some dealers haven’t bought cars at auction for several weeks, while others have been restricted to four to five per auction visit. Dealers are also retailing fewer used cars at higher prices.

“Dealer groups will be buying stock again in December… and the used market will take some strong momentum into 2024.”

Setterfield claimed March/April would herald the first notable rise in values, due largely to a paucity of three- to four-year-old cars. 

He said: “March into April is the first month when it gets better. The further we go into the year, we are really going to start to see the difference because of the cars that weren’t registered in the pandemic… [and] when you track that forward, we are going to get a massive shortfall in a very short space of time. You’ll go from having about 1.25 million vehicles over the last 12 months to only having 850,000. 

“It’s about February when it all starts to move very rapidly in the space of a couple of months. Cars are going to be in very, very much lower supply, and we’re already seeing it in the leasing returns. You can see that four- and five-year-old cars from 2018/2019, instead of being 5% [of the market], they’re now 15%. And the proportion of cars from two to three years ago (2020/2021), instead of being up near 25%, that’s down below 10%.”