The new and used car market is showing signs of reverting to pre-pandemic market dynamics, with experts advising a cautiously optimistic outlook.
During Assurant’s “Optimising The Year Ahead” webinar, which was joined by more than 100 delegates, Autovista chief economist Christof Engelskirchen said that a shift back to oversupply and tight demand is underway.
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Engelskirchen said: “We are returning to a market where there is increased supply and limited demand but there is cause to stay positive and optimistic. So, while car values might be falling as a result, consumer confidence and business confidence are trending up, and the industry needs to react appropriately to this changing situation throughout the year.”
He explained that the recent rapid decline in car values is due to the end of the pent-up demand that sustained the market over the last four years.
The undersupply was supporting car values, which is diminishing, he added.
He also mentioned that rising interest rates and increased living costs are causing consumers to reconsider or delay their car purchases.
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By GlobalDataMore specifically, the electric vehicle (EV) market has depreciated the most.
Engelskirchen attributed this to lifecycle depreciation and recent price reductions by manufacturers.
He said: ” Some have started a price war which is washing through and affecting what you can command for a used vehicle which is two, three, four years old and was originally priced much, much stronger.”
Engelskirchen also pointed out that as EVs enter the mass used car market, they are facing pressure due to a lack of demand.
“The demand just is not there,” he said, suggesting that the market may not be fully prepared to absorb these vehicles.
Despite these challenges, Engelskirchen identified an opportunity for dealers to maximise their business this year by focusing on providing the best possible consumer journey, particularly by improving their online presence.
“It is all about boosting the customer experience and loyalty with a seamless buying, leasing, owning and returning process, which is similar to something that we are seeing OEMs try to capitalise on when they implement the agency model.”
Earlier this week, Close Brothers Motor Finance released research that indicates that over half of drivers planning to buy a car this year.
The study revealed that approximately one in four potential buyers are considering buying a hybrid.
