5 Sep 22

Used-car sales down across Europe – but prices still go up

As prices rise for everything from food to energy, consumers across Europe are putting off big-ticket purchases, including cars – both new and used. Yet new figures from Autovista show that the residual values (RVs) of used cars are actually going up. 

New-car sales have been weak across Europe for some time now. This has had a twofold impact on the used-car market. In the short term, demand moves from the new-car to the used-car market. And in the longer term, fewer new cars now means fewer used cars in the near future. Both factors support strong RVs. 

Diminishing demand

But the unfolding cost of living crisis is changing this scenario, with European consumers increasingly reluctant even to buy used cars. “Despite (used-car) supply challenges, the prospect of diminishing demand means prices may already have peaked in some countries, and the %RV (the retained percentage of the list price, Ed.) is forecast to decline, or at best stabilize, across European markets in 2023 and 2024”, Autovista writes in its Monthly Market Update. 

A few weeks ago, Autovista reported that used-car sales had gone down in the first half of 2022 across Europe’s Big Five markets, with a double-digit decline in Germany (-14.6% year-on-year), and France (-12.4%), and with considerable rollbacks in the UK (-8.3%), Italy (-7.1%) and Spain (-4.5%).

Month-on-month growth

Framing this is the wider supply-and-demand context produces a picture that shows how despite slowing used-car sales across Europe in August, RVs still grew slightly quicker than list prices; resulting in a month-on-month growth of average used-car prices, albeit from just 0.1% in Spain to 1.3% in Austria. 

Rejoice while you can, because as mentioned: this may be peak RV, and things could get worse in the months and years to come. Here’s a closer look at some of Autovista’s key European markets.

Germany: RVs may be peaking

  • On Germany’s used-car market, more vehicles are currently flowing in than flowing out, with the more expensive vehicles not moving on. This may be a sign that RVs are peaking right now. However, a rapid and sharp price drop is not expected – at least not this year. 
  • With new-car registrations down 11% in July (compared to the same month last year) and tactical registrations at a historic low, the prospects for very young used cars in 2022 and 2023 are bleak. 
  • The used-car market of the near future will have a volume problem, but it will be more diverse, with newcomers like MG, Polestar and Lynk&Co outselling established players like Honda, Jaguar and Alfa Romeo, respectively. 

Italy: sales slowdown, RV growth

  • In August, %RV in Italy increased by 0.3% compared to July, despite the sales-volume index falling 8.1%.
  • Compared to the same month last year, %RV increased by 16.2%, but the sales-volume index was also 29.2% higher than in August last year.  
  • Average stock days increased slightly to 62 days, with the Toyota C-HR and the Nissan Qashqai being the fastest movers in August.
  • Used diesels are doing surprisingly well, with %RV in August up 1.5% over July, and volume up 19.6% over the same month last year.   
  • In contrast, %RV for BEVs declined 2.2% month on month – but were still higher than in August 2021. 
  • RVs for used LPG and CNG cars were up around 14% compared to August 2021. Both fuel types are well established on the Italian market.

Spain: shifting to cheaper, smaller and older

  • In August, available stock volumes on the Spanish used-car market were about half of what they were a year ago. This helps explain the 12.1% year-on-year drop in sales-volume index. 
  • Economic uncertainty is shifting consumer demand towards cheaper, smaller and older cars. Four out of 10 used cars sold in Spain in 2022 so far were more than 10 years old. Such an ageing stock makes it difficult to transition to a less polluting fleet.
  • Shrinking supply leads to rising prices. Buyers pay 30% more today for a vehicle more than seven years old than they did in August 2021.
  • The shortage continues to affect vehicles up to four years old. Dealers can’t source enough “new” used cars from the renewals of lease and rental fleets, so imports have become a relevant source of sales, having increased by 50% so far this year. 
  • RVs rose less than 1% in August, the slowest rate in months. The average price of a three-year-old car with 60,000 km was up 22% compared to August 2022.

UK : cost of living affects willingness to buy

  • The RV for the average three-year-old car in the UK increased by 3.8% in August (month-on-month) – but that is a reflection more of the shortage of such models than of the overall used-car market. 
  • As new cars remain in short supply, contract extensions are used to keep fleets up to their required number. This reduces the number of vehicles – especially three-year-olds - being defleeted, and creates an imbalance between the supply and demand for vehicles of this age. 
  • Overall the UK’s used-car market’s low supply is balanced by its low demand. The average stock market days were 47.2 in August, the same as in July, but 9.5 days longer than in August 2021. It is likely that cost-of-living pressures are affecting UK consumers’ willingness to buy. 

Austria : restricted supply remains key to RVs

  • The supply of two-to-four-year-old used cars in Austria was 0.8% lower than in August last year.
  • The volume of diesel cars in August was down by 8.3% compared to the same month last year. However, the volume of BEVs was down by a whopping 46.6%. Demand for BEVs and hybrids is weakening, but their supply remains a challenge. 
  • Overall supply improved by 2.8% month-on-month, but with sales slowing, average stock days increased to 58.2 days. BEVs are selling fastest (55.3 days), followed by petrol cars (56.8 days), HEVs (58.9 days), diesel cars (59.1 days) and PHEVs (the slowest sellers, at 65.2 days). 
  • RVs for three-year-old cars increased modestly, both in absolute terms and as a percentage of the list price (%RV). The latter rose by 1.3% (month-on-month) and 21.7% (year-on-year), with an average value retention of 53.7%. PHEVs had the top trade-in value (55%), BEVs the lowest (48.3%).
  • With new-car sales still noticeably lower than pre-pandemic levels, undersupply of used cars will continue to determine RV levels in Austria well into 2023.

Switzerland : RVs outpace list prices

  • Strong demand, low supply, rising used-car prices: in a nutshell, that’s the Swiss used-car market of the past two years. 
  • In August, the sales-volume index was down 17.7% lower than in July, and 14.8% lower than in August 2021. Yet RVs have grown quicker than list prices, if only slightly so. 
  • As a result value retention for three-year-old vehicles has reached 50.8% (up 18.5% compared to previous August). For BEVs, the %RV gains were 21.4% (to 48.6%), for diesel cars, they were up 20.1% (to 49.7%) and for petrol cars they were up 17.6% (to 51.6%).
  • The supply of diesels on the used-car market was down 8.7% compared to August 2021, but for BEVs, that figure was 31.6%. Considering the strong demand for used BEVs and other hybrids, that leaves the Swiss used-car market short of stock. 
  • Average stock market days for two-to-four-year-old passenger cars decreased from July to August to 64 days. Quickest sellers are petrol cars (63 days), followed by diesel cars (66 days), BEVs (69 days), PHEVs (80 days) and HEVs (85 days). 
  • New-car registrations in 2022 being lower than pre-Covid 2019, market supply will remain tight, even as demand cools. Values for three-year-old used cars are forecast by year’s end to be up 11% over December 2021, but will decline again in 2023 and the year after. 

Image: Shutterstock

Authored by: Frank Jacobs