20 Apr 16

UK used-car market tips into oversupply

The UK used-car market has reached its long-predicted tipping point into oversupply. The volume of vehicles at auction already increased 3.7% in 2016, with a wide range of models starting to fall in value, says Rupert Pontin, Head of Valuation at Glass's.

“We expect this period of general oversupply to continue throughout the rest of the year and into 2017, as increasing numbers of vehicles come to market”, says Pontin. “A large number of these are of course 1- to 3-year-old returns from the ongoing boom in Personal Contract Purchases (PCPs)”.

Pontin does not foresee a sudden collapse in values, “but there will be a slow decrease as volumes gradually increase”. However, those increasing volumes will be very much concentrated on a limited range of models. 

“PCPs have brought a range of models into affordability, such as entry-level models from prestige German manufacturers. Their values will certainly be under pressure over the coming months. Niche vehicles and others unavailable in high volumes will stay relatively firm”.

Predictions are complicated by the EU referendum in June, Pontin points out: “If the UK votes to leave the EU, it will be very difficult to predict the effect on new and used-car markets. However, simply because of the high degree of uncertainty, our view is that it would be negative”.

Image: Misterzee, CC BY 3.0 

Authored by: Frank Jacobs