Prices of used cars are expected to decline sharply, UK-based Pink Car Leasing has warned.

Rising interest rates, risk of negative equity, poorly maintained vehicles and availability of new cars are some of the factors that could send used car prices down the cliff.

According to Pink Car Leasing, other factors include the rising cost of finance, which has become more expensive due to rate hikes and a 33.6% increase in credit refusal to those applying for personal and business finance, and leases.

Since November 2021, bad debt has also surged more than 40% and the leasing firm expects to see a huge correction in the used car market.

Pink Car Leasing has also claimed that major used car retailers preparing to dump stock that will affect values, while garages are increasing labour and parts prices by more than 15%.

Also, the looming cost of living crisis due to soaring inflation, which could peak at 13.3% in October 2022, is impacting the used car market.

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By GlobalData

Pink Car Leasing commercial director Caroline Hill said: “As soon as a new vehicle car leaves the showroom the value drops, and in some cases sharply, thereby potentially pushing the owner into negative equity.

“And with the supply of new vehicles starting to improve, including the availability of electric models, this is also putting further pressure on used car prices. The cost of living crisis is also having an impact with people having less disposable income as day-to-day living expenses, including food and energy costs, rise.  

“With all these factors in play, we are saying to those considering buying a car, think carefully. There are other ways of owning a new vehicle and we would urge them to consider these options.”

According to SMMT’s data, the used car market in the UK fell by 18.8% during the second quarter of 2022.