Do car prices 'deflate' from here?
Poll: Do car prices 'deflate' from here?
Total Members Polled: 67
Discussion
I frankly don't recognise the used car market. Last time I was looking was 2019. I have recently had friends asking me for buying advice and being dumbfounded by how little you get for your money right now.
Car prices are very high compared to what we're used to in the UK.
I think I understand the key factors which have contributed, so my question is this:
Will used car prices as a whole, effectively 'deflate'?
Let's say we're talking household commodity type cars and excluding oddballs and rarities.
I note car production increased sharply in 2022 and 2023 and is forecast to be 86 million. This is compared to a peak of 97 million in 2017 and 2018.
I suppose it will take several years for the increase in production to be felt in the used car market and even then, the dip in production between 2019 and 2021 will continue to be felt for several years after that.
Do we see car prices falling at all, or is it one of those irritating situations where prices will stay put and inflation will gradually ebb away at them and make them progressively more palatable?
It seems to me that right now is probably a pretty bad time to buy a car.
Car prices are very high compared to what we're used to in the UK.
I think I understand the key factors which have contributed, so my question is this:
Will used car prices as a whole, effectively 'deflate'?
Let's say we're talking household commodity type cars and excluding oddballs and rarities.
I note car production increased sharply in 2022 and 2023 and is forecast to be 86 million. This is compared to a peak of 97 million in 2017 and 2018.
I suppose it will take several years for the increase in production to be felt in the used car market and even then, the dip in production between 2019 and 2021 will continue to be felt for several years after that.
Do we see car prices falling at all, or is it one of those irritating situations where prices will stay put and inflation will gradually ebb away at them and make them progressively more palatable?
It seems to me that right now is probably a pretty bad time to buy a car.
The whole lot has been pumped.
Low interest rates for consumers, QE for manufacturers to finance debt cheaply.
Then covid money handouts.
Now it’s all been taken away and reversed, it’s just going to take time to find the new level.
In my view. Two or three years of larger than usual depreciation will follow. 20-30pc annual drops.
Manufacturers getting no traction with sales as prices are way beyond most buyers financing, so bad years.
Then big discounts off rrps when costs of borrowing fall.
And rrps staying still for many years.
Low interest rates for consumers, QE for manufacturers to finance debt cheaply.
Then covid money handouts.
Now it’s all been taken away and reversed, it’s just going to take time to find the new level.
In my view. Two or three years of larger than usual depreciation will follow. 20-30pc annual drops.
Manufacturers getting no traction with sales as prices are way beyond most buyers financing, so bad years.
Then big discounts off rrps when costs of borrowing fall.
And rrps staying still for many years.
I think the market is being hit by a double-whammy of very limited supply coming off the lease market due to production shut-downs during the Covid lock-downs, and rising demand for used cars caused by spiraling new lease costs now due to inflation.
Residual values have, until very recently, been weak in the UK due to a combination of cheap finance and a strong element of "keeping up with the Joneses" providing both the means and the desire for people to take on new cars which they wouldn't have had the cash-flow available to buy. The former has obviously been disrupted but I don't think the latter is going to disappear any time soon so I suspect the new market will recover as and when lease costs fall back into people's reach; then two-three years after that when that glut of cars hits the used market residuals will start to tumble.
Of course inflation will mean that the absolute prices will never fall back to where they were.
Residual values have, until very recently, been weak in the UK due to a combination of cheap finance and a strong element of "keeping up with the Joneses" providing both the means and the desire for people to take on new cars which they wouldn't have had the cash-flow available to buy. The former has obviously been disrupted but I don't think the latter is going to disappear any time soon so I suspect the new market will recover as and when lease costs fall back into people's reach; then two-three years after that when that glut of cars hits the used market residuals will start to tumble.
Of course inflation will mean that the absolute prices will never fall back to where they were.
I dint think anyone really knows; every time a crash has been predicted since Covid, the market has managed to defy the doom mongers.
Ultimately we need manufacturers to start chasing volume again and offering incentives. List prices for a long time were a work of fiction offset by these incentives (my M140i was supposedly £38k but BMW happily sold me one for £28k). Since they supply was restricted, those discounts have been removed but they were still selling cars. If demand falls, which is probably not an unreasonable expectation then discounts on new cars will hopefully come back and take the wtng out of the used market.
Ultimately we need manufacturers to start chasing volume again and offering incentives. List prices for a long time were a work of fiction offset by these incentives (my M140i was supposedly £38k but BMW happily sold me one for £28k). Since they supply was restricted, those discounts have been removed but they were still selling cars. If demand falls, which is probably not an unreasonable expectation then discounts on new cars will hopefully come back and take the wtng out of the used market.
The big thing on the horizon will be what the manufacturers need to do to hit their EV sales targets from 1st Jan onwards under the ZEV Mandate.
Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
plfrench said:
The big thing on the horizon will be what the manufacturers need to do to hit their EV sales targets from 1st Jan onwards under the ZEV Mandate.
Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
This. Expect all the commentary in ‘24 to be about this. Reduced ICE options in the line up priced to disincentivise (see BMW 5 series) and the start of an EV price war (see Tesla who’ve fired the starting gun). So EV will be the only rational purchase for generic SUVs and German stuff.Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
plfrench said:
The big thing on the horizon will be what the manufacturers need to do to hit their EV sales targets from 1st Jan onwards under the ZEV Mandate.
Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
Think the lower end of the EV market is about to be flooded with new Chinese brands they are only just getting started .. I wouldn’t want to be a European bread and butter maker at the cheaper end of the market maybe premium manufacturers will survive it but not sure about the others..Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
I have just been looking on auto trader for a car that's suitable for a family, my kids are all growing up and complaining how our current car isn't big enough for them in the back and then the arguments start on who's sitting in the middle etc, I went looking with a budget of around 13k, something where there's plenty of space in the rear, newer than our current 2013 car and something that will also make me happy driving it seen as i am the only one who can drive out of me and the Mrs.
I was actually surprised at how little £13k gets you, and most of the stuff that fits the above either wasn't there or had moon mileage on it, we like to keep our cars for a good 4 or 5 years so going on how prices are at the minute we will be waiting for things coming down.
I was actually surprised at how little £13k gets you, and most of the stuff that fits the above either wasn't there or had moon mileage on it, we like to keep our cars for a good 4 or 5 years so going on how prices are at the minute we will be waiting for things coming down.
D4rez said:
plfrench said:
The big thing on the horizon will be what the manufacturers need to do to hit their EV sales targets from 1st Jan onwards under the ZEV Mandate.
Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
This. Expect all the commentary in ‘24 to be about this. Reduced ICE options in the line up priced to disincentivise (see BMW 5 series) and the start of an EV price war (see Tesla who’ve fired the starting gun). So EV will be the only rational purchase for generic SUVs and German stuff.Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
andy43 said:
D4rez said:
plfrench said:
The big thing on the horizon will be what the manufacturers need to do to hit their EV sales targets from 1st Jan onwards under the ZEV Mandate.
Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
This. Expect all the commentary in ‘24 to be about this. Reduced ICE options in the line up priced to disincentivise (see BMW 5 series) and the start of an EV price war (see Tesla who’ve fired the starting gun). So EV will be the only rational purchase for generic SUVs and German stuff.Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
plfrench said:
So surely a significant switch in the financial attractiveness of new EVs next year will mean a reduction in the existing used car values. I guess it might just mean that used EVs get even cheaper and used ICE & hybrids depreciate less - it'll depend just how stubbornly people don't want an EV
Yes I think net positive for new EV sales but at the cost of the used market for those who bought during the post Covid supply crunch market. I can see real terms price corrections for new vehicles to adjust for this in the PCP/Lease market possibly propped up in used with supported used car trade in to keep the market on an even keelandy43 said:
D4rez said:
plfrench said:
The big thing on the horizon will be what the manufacturers need to do to hit their EV sales targets from 1st Jan onwards under the ZEV Mandate.
Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
This. Expect all the commentary in ‘24 to be about this. Reduced ICE options in the line up priced to disincentivise (see BMW 5 series) and the start of an EV price war (see Tesla who’ve fired the starting gun). So EV will be the only rational purchase for generic SUVs and German stuff.Missing the targets = not an option - fines are horrendous, so two options, sell more EVs (incentivise those), or fewer ICE & hybrid (de-incentivise those).
I would expect the considerably increased attractiveness of new EVs will have a knock-on effect of reducing used car prices generally.
It's going to be a funny old few years though, as the manufacturers won't want to give away more than they need to in margin, however they can't leave it too late in the year to ensure they hit targets.
James_33 said:
I have just been looking on auto trader for a car that's suitable for a family, my kids are all growing up and complaining how our current car isn't big enough for them in the back and then the arguments start on who's sitting in the middle etc, I went looking with a budget of around 13k, something where there's plenty of space in the rear, newer than our current 2013 car and something that will also make me happy driving it seen as i am the only one who can drive out of me and the Mrs.
I was actually surprised at how little £13k gets you, and most of the stuff that fits the above either wasn't there or had moon mileage on it, we like to keep our cars for a good 4 or 5 years so going on how prices are at the minute we will be waiting for things coming down.
You're spoilt for choice with mk3 Octavias, even £10k will get you a nice car from 2015 on with the splendid 1.4 TSI 150 engine. For extra fun you might just stretch to a VRS. Things do seem to be coming down though so it makes sense to hold on if you're not desperate.I was actually surprised at how little £13k gets you, and most of the stuff that fits the above either wasn't there or had moon mileage on it, we like to keep our cars for a good 4 or 5 years so going on how prices are at the minute we will be waiting for things coming down.
A couple of years ago, £5k would get you a pretty decent example of nearly anything you wanted - 4x4, estate, convertible, etc.
Nowadays I think that figure is more £8k-10k.
I guess it's a combination of most people wanting finance rather than actually buying a car, the financial situation in the country, and ULEZ-type stuff devaluing older cars.
Mind you, from my experience the dealers have unsurprisingly not upped their part ex prices accordingly.
Nowadays I think that figure is more £8k-10k.
I guess it's a combination of most people wanting finance rather than actually buying a car, the financial situation in the country, and ULEZ-type stuff devaluing older cars.
Mind you, from my experience the dealers have unsurprisingly not upped their part ex prices accordingly.
Fuzzarr said:
James_33 said:
I have just been looking on auto trader for a car that's suitable for a family, my kids are all growing up and complaining how our current car isn't big enough for them in the back and then the arguments start on who's sitting in the middle etc, I went looking with a budget of around 13k, something where there's plenty of space in the rear, newer than our current 2013 car and something that will also make me happy driving it seen as i am the only one who can drive out of me and the Mrs.
I was actually surprised at how little £13k gets you, and most of the stuff that fits the above either wasn't there or had moon mileage on it, we like to keep our cars for a good 4 or 5 years so going on how prices are at the minute we will be waiting for things coming down.
You're spoilt for choice with mk3 Octavias, even £10k will get you a nice car from 2015 on with the splendid 1.4 TSI 150 engine. For extra fun you might just stretch to a VRS. Things do seem to be coming down though so it makes sense to hold on if you're not desperate.I was actually surprised at how little £13k gets you, and most of the stuff that fits the above either wasn't there or had moon mileage on it, we like to keep our cars for a good 4 or 5 years so going on how prices are at the minute we will be waiting for things coming down.
It's the exact same with SUV's on the "premium" end, X5s and alike for that sort of money will get you something for the most part from over 10 years ago, so it does make me understand in some cases why people go down the PCP route depending on how long you plan on keeping a car etc.
andy43 said:
Not convinced. Used EVs are in the toilet at the moment and there are very few private buyers of new or used.
Are they? We've been vaguely looking for a second-hand family EV for a while and values still seem pretty high to me compared to last time I bought a (petrol) car! kambites said:
andy43 said:
Not convinced. Used EVs are in the toilet at the moment and there are very few private buyers of new or used.
Are they? We've been vaguely looking for a second-hand family EV for a while and values still seem pretty high to me compared to last time I bought a (petrol) car! Tesla we sold for 68k middle of last year is now 45k at best, Honda E we bought last august has lost 8-10k I’d guess.
Our petrol Kia stinger bought last year is maybe down 5k but that’s more like normal depreciation.
You could be right that they’re not all back down to 2019/early 2020 levels yet though.
EVs I think are still selling to businesses because of the tax breaks but the second owners can’t be there in great numbers or the used prices would still be a bit higher.
I bought wisely during the lockdown it was a brand new van, there were lots of stock it seemed like they couldn't give them away, so for a short time it was a buyers market, three years on and looking at the used asking prices of the same van its thousands more...the best residuals I've ever had, the asking price for the same van new in 2023 is an unbelievable £10000 more.
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