The Vehicle Remarketing Association (VRA) is warning that the current health of the used car market could rapidly deteriorate in the last quarter of 2024, due to several emerging issues.
According to Marcus Blakemore, chair of the VRA’s industry trends sub committee, several risk factors – including the upcoming Budget, declining consumer confidence, and a surge in defleet volumes – pose significant threats to the market’s stability.
Blakemore explained that while the used car market appears strong at the moment, with demand and supply balanced and prices holding firm, potential changes could be swift and significant.
At a retail level, he said, there are concerns among dealers about unit profitability due to an unwillingness to increase prices although generally, the mood is positive.
However, he warned that the situation could shift in a matter of weeks rather than months, particularly in the wake of the government’s Budget announcement on October 30.
With widespread expectations of tax increases and government warnings about economic hardship, Blakemore suggested that consumer confidence could quickly fall, potentially curbing the appetite for major purchases such as cars.
This decline in confidence could have serious implications for the used car market, with reduced demand leading to pressure on prices.
Blakemore also pointed to larger defleet volumes that are expected to enter the market soon, which could push the supply of used cars beyond demand, risking a drop in values.
“It’s not quite a perfect storm but there is potential for the current, relatively upbeat situation to change before the end of the year,” he said.
A specific area of concern is the increasing volume of electric vehicles (EVs) entering the used car market.
While EV adoption is rising and the market appears more stable than in previous years, some dealers remain cautious.
“It’s important to caveat that uptake of EVs continues to rise quickly, and that the market now appears stable, certainly compared to the convulsions of the last couple of years. Some dealers are now having a relatively good time selling EVs.
“Despite this, we continue to hear concerns from some independent dealers about EV volumes. They are aware that stock availability of petrol and diesel is already starting to decline thanks to company car buying trends and the ZEV Mandate. They feel neither they nor their customers are prepared for electrification.
“Really, it seems that more needs to be done to support these dealers through this process, helping them identify which EV models are most suitable for their audience and how to provide an educational sales process that helps consumers find the EV and the charging solution that meets their needs.”
Despite these risks, Blakemore noted that there remains a possibility that the positive momentum could continue into the last quarter.
“While there are an unusually high number of risk factors present, it is not inconceivable that the government has overmanaged negative expectations of the Budget and that once the new measures are announced by the Chancellor on October 30, consumers feel relatively positive and soak up increased stock volumes.”