Used-car costs stubbornly resist weakening demand

02 September 2022

Regardless of slowing used-car gross sales exercise throughout Europe in August as shoppers cope with rising residing prices, residual values (RVs) grew barely faster than checklist costs. This resulted in month-on-month development of common used-car costs represented as a retained proportion of checklist worth (%RV) in all markets, albeit starting from solely 0.1% in Spain to 1.3% in Austria.

The restoration of new-car registrations misplaced momentum in July, curbing provide into the used-car market. Accordingly, Autovista24 downgraded its European new-car market forecasts final month. The availability of recent vehicles, and subsequently used vehicles, stays a difficulty that’s anticipated to persist into 2024, which is able to proceed to assist RVs.

However, used-car costs are underneath rising strain as used-car transactions retreat with the cost-of-living disaster additional eroding the willingness of shoppers to purchase each new and used vehicles. Regardless of provide challenges, the prospect of diminishing demand means costs could have already got peaked in some nations and the %RV is forecast to say no, or at greatest stabilise, throughout European markets in 2023 and 2024.

The interactive month-to-month market dashboard options Austria, Germany, Italy, Spain, Switzerland, and the UK. It additionally features a breakdown of key efficiency indicators by gasoline kind, common new-car checklist costs, in addition to sales-volume and lively market-volume indices.

Provide stays key RV think about Austria

The Austrian used-car market continues to be underpinned by restricted provide. ‘On common, throughout all passenger vehicles aged two-to-four years, the provision quantity in August was 0.8% decrease than in the identical month final 12 months. Already in 2021, provide was considerably decrease than in the beginning of 2020,’ famous Robert Madas, Eurotax (a part of Autovista Group) regional head of valuations, Austria, Switzerland, and Poland.

Diesel vehicles are nonetheless lacking from the market, with a drop of 8.3% in comparison with August 2021. However the provide of battery-electric automobiles (BEVs) confirmed a good stronger downward development once more, with a drop of 46.6% 12 months on 12 months. Market exercise reveals weakening demand for BEVs and hybrids of every kind, however their provide stays difficult.

However, the general provide scenario stabilised considerably in August, with a month-on-month improve of two.8%, however gross sales exercise is slowing, and common inventory days elevated barely to a median of 58.2 days. BEVs are promoting the quickest, averaging 55.3 days, adopted by petrol vehicles with 56.8 days, hybrid-electric automobiles (HEVs) with 58.9 days, and diesel vehicles with 59.1 days. Plug-in hybrids (PHEVs) are promoting the slowest, averaging 65.2 days.

There was a modest improve in RVs of 36-month-old vehicles in Austria, when it comes to each absolute values (€RV) and retention of checklist worth (%RV). The %RV rose by 21.7% 12 months on 12 months (1.3% month on month) in August, with vehicles retaining 53.7% of their checklist costs on common. PHEVs are at present main with a commerce worth of 55.0%, adopted intently by HEVs (54.3%), diesel vehicles (54.1%), and petrol vehicles (53.7%). BEVs aged 36-months retain the bottom worth, at 48.3% of checklist worth.

Madas assumes the market parameters won’t change within the medium time period, as a result of new-car registrations are nonetheless noticeably decrease than earlier than the disaster. Final 12 months was down 27% in comparison with 2019, and the outlook for 2022 is even under final 12 months’s quantity. ‘Even with cooling demand, the provision of recent vehicles would be the key issue sooner or later improvement of RVs. Provide chains have been already disrupted, and along with the semiconductor scarcity, the warfare in Ukraine and COVID-19 lockdowns in China have led to even longer supply instances for many new automobiles,’ Madas famous.

Because of this undersupply, Madas expects RVs of three-year-old passenger vehicles to proceed to rise this 12 months. ‘Solely when the new-car market picks up considerably, and thus volumes on the used-car market improve, and demand diminishes, are values prone to come underneath strain. This may most likely not be the case earlier than 2023.’

RV peak ‘presumably reached’ in Germany

The German used-car market continued to point out indicators of great consolidation in August. Value improvement is tense, with few and rare will increase, whereas inventory days proceed to rise.

‘That is one other signal that “the air is out” and that the height has presumably been reached throughout the board. Extra automobiles are at present flowing in than are flowing out and costly automobiles aren’t shifting on. Nevertheless, a fast and sharp drop in costs is just not anticipated this 12 months,’ commented Andreas Geilenbruegge, head of valuations and insights at Schwacke (a part of Autovista Group).

It’s fascinating to have a look at the most recent new-car registrations information, i.e. the used vehicles of tomorrow. The whole quantity to July was 11% decrease than in the identical interval final 12 months, which is partly ‘because of the low motivation of producers to steer the restricted output that’s accessible into the unprofitable seller, producer and, above all, rental channels,’ Geilenbruegge famous.

The share of so-called tactical registrations via these channels is at a historic low of lower than one third, a determine that was final reached in 2002 – excluding 2009 when a scrappage scheme was in place. ‘There are bleak prospects, then, for the phase of very younger used vehicles this 12 months and subsequent,’ Geilenbruegge surmised.

Additionally fascinating is model efficiency in view of the final provide shortages. Cupra, for instance, is now solely simply behind its SEAT sibling and had already surpassed final 12 months’s whole by 2,000 items in July. To date this 12 months, the Cupra Formentor is the second most registered C-SUV in Germany, behind the Volkswagen Tiguan and forward of the Ford Kuga.

Newcomers that may ship vehicles are doing properly too. MG is simply forward of Honda with 4 fashions and a fifth, the MG4, is already within the beginning blocks. Polestar is registering extra vehicles than Jaguar, intently adopted by Lynk&Co, which has moved forward of Alfa Romeo and Lexus. ‘So, the used-car market of the close to future will nonetheless have a quantity downside, however it’s going to turn out to be extra various,’ Geilenbruegge concluded.

RV development continues in Italy regardless of gross sales slowdown

Though the tempo has slowed in current months, the expansion in residual values didn’t cease in August, with a median improve within the %RV of 0.3% in comparison with July and 16.2% in comparison with a 12 months in the past. That is regardless of the sales-volume index falling 8.1% in comparison with a month earlier, though it’s 29.2% increased than in August 2021. The time a used car stays in inventory elevated barely, to 62 days, with the Toyota C-HR and Nissan Qashqai being one of the best performers in August when it comes to gross sales pace.

‘Diesel is the gasoline kind with probably the most shocking outcomes when it comes to %RV improvement, with a 1.5% improve over a month earlier and 19.6% development in comparison with August 2021,’ commented Marco Pasquetti, head of valuations, Autovista Group Italy.

The sales-volume and active-market quantity indices of diesel vehicles fell equally month on month, however Pasquetti notes that the respective index figures of 95.7 and 82.1, ‘point out a larger fall within the lively listings on the primary on-line used-vehicle portals, of round 18%, in comparison with January 2021.’

The common %RV of BEVs is on a downward development, with a month-on-month decline of two.2% in August. However, costs are considerably increased than a 12 months earlier and RVs of liquefied petroleum fuel (LPG) and compressed pure fuel (CNG) vehicles, that are nonetheless properly established on the Italian market, are optimistic too. Values of each gasoline varieties have grown round 14% in comparison with August 2021.

Shift to cheaper, smaller, older used vehicles in Spain

The Spanish new-car market continues to publish detrimental outcomes, with a cumulative year-on-year drop of 9.4% for passenger vehicles and SUVs that, though steep, is much less dramatic than the 30% contraction of the light-commercial car (LCV) market.

‘The shortage of semiconductors continues to restrict the entry of LCVs into the market and, as well as, excessive inflation, gasoline costs, and financial uncertainty are slowing down, or not less than suspending, shoppers’ buying selections,’ defined Ana Azofra, Autovista Group head of valuations and insights, Spain.

The scarcity of provide within the used-car market has, due to this fact, not but been resolved, and continues to cut back the accessible inventory volumes by nearly a half in comparison with a 12 months in the past. That is partly why there may be additionally a drop within the sales-volume index, which was down 12.1% 12 months on 12 months in August.

Financial uncertainty can be having an affect on the used-car market, though its most seen impact is just not a lot an absence of demand however a shift in direction of cheaper, smaller and – particularly – older vehicles. 4 out of 10 used vehicles bought in 2022 are greater than 10 years outdated and, for instance, there are as many 15-year-old vehicles bought as new vehicles. In these circumstances, it appears tough to maneuver in direction of a much less polluting fleet. Because the inventory of those automobiles is shrinking, their costs have continued to rise. Consumers pay 30% extra at present for a car that’s over seven years outdated than in August 2021.

‘Contemplating the market sector that the majority impacts gross sales by professionals, the scarcity continues to affect pre-owned vehicles as much as 4 years outdated. Sellers have neither been in a position to feed on gross sales of recent vehicles nor have they been in a position to feed on renewals of leasing and rental fleets. Imports have thus turn out to be a related supply of gross sales, rising by 50% to this point this 12 months,’ Azofra commented.

On this state of affairs, residual values of automobiles proceed to rise, though not on the similar pace as in earlier months. August’s rise was lower than 1% for the primary time in months. Financial uncertainty is holding again demand and costs are starting to peak. However, in comparison with August 2021, the typical worth of a three-year outdated used automotive with 60,000 km has risen from €16,095 to €19,765, equating to an increase of €3,670 or 22%.

Gross sales sluggish however RVs outpace checklist costs in Switzerland

For over two years, the Swiss used-car market has been characterised by wholesome demand, low provide, and rising used car-prices. ‘Throughout all two-to-four-year-old passenger vehicles, the provision quantity in August was 10.9% increased than a 12 months earlier and already in 2021, the provision was considerably decrease than in the beginning of 2020,’ famous Hans-Peter Annen, head of valuations and insights, Eurotax Switzerland (a part of Autovista Group).

The sales-volume index in August was 17.7% decrease than in July, and 14.8% down 12 months on 12 months. However, residual values have grown barely faster than checklist costs. This market atmosphere has led to an extra improve within the common worth retention of 36-month-old passenger vehicles, to 50.8% (up 18.5% in comparison with August 2021). Petrol vehicles posted sturdy year-on-year %RV good points of 17.6%, to 51.6%, as did diesel vehicles (up 20.1% to 49.7%) and BEVs (up 21.4% to 48.6%).

Diesel vehicles are nonetheless lacking from the market, with a drop of 8.7% in comparison with August 2021. However the provide of BEVs confirmed a good stronger downward development once more, with a drop of 31.6% 12 months on 12 months. However, market exercise reveals comparatively sturdy demand for BEVs and hybrids of every kind, leaving their provide brief.

The common days to promote decreased in August in comparison with July, with a passenger automotive aged two to 4 years in inventory for 64 days. Petrol vehicles are promoting quickest, after a median of 63 days, adopted by diesel vehicles after 66 days, BEVs after 69 days, PHEVs after 80 days, and HEVs after 85 days.

Disruption to the provision of recent vehicles, exacerbated by the warfare in Ukraine, and up to date list-price will increase are key components sooner or later improvement of RVs in Switzerland. Provide chains are closely affected, resulting in lengthy supply instances for many new automobiles.

‘As new-car registrations in 2022 are markedly decrease than earlier than the COVID-19 pandemic (2021 was down 23.4% in comparison with 2019), the market parameters won’t considerably change within the medium time period, at the same time as used-car demand cools. Values of three-year-old used vehicles will stay excessive this 12 months, and are forecast to finish 2022 roughly 11% up on December 2021, earlier than declining over time 2023 and 2024,’ Annen concluded.

Dwelling prices affecting UK shoppers’ willingness to purchase

The common residual worth of a three-year-old automotive within the UK elevated by 3.8% month on month in August. ‘While optimistic, this motion doesn’t precisely mirror the nation’s normal used-car market, as a substitute it displays rising checklist costs and the scarcity of three-year-old fashions accessible available in the market,’ defined Jayson Whittington, Glass’s (a part of Autovista Group) chief editor, vehicles and leisure automobiles.

With new-car availability being hampered by lengthy delays because of element provide, the contract-hire sector continues to expertise a excessive quantity of contract extensions. That is in flip resulting in a discount of de-fleeted vehicles hitting the wholesale market, making a provide and demand imbalance for this age of automotive.

‘The common motion throughout all car ages that Glass’s values within the UK was 0.02% in August in comparison with July, reflecting a secure general market being influenced by usually low demand and provide,’ Whittington commented.

It took a used-car seller 47.2 days on common to retail a unit in August, the same time to final month, however that is 9.5 days longer than in August 2021. ‘While it’s doable {that a} scarcity of “in-demand” vehicles may very well be contributing to this gross sales price, it’s extra probably that cost-of-living pressures within the UK are affecting shoppers’ willingness to commit to purchase,’ Whittington concluded.

The August 2022 month-to-month market dashboard offers the most recent pricing, quantity and stock-days information.


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