In the latest motor trade news, used car values have seen a decline of 1.9% this month, marking the most significant drop of the year. However, industry experts at Cap HPI are assuring dealers that there's no need to fret as this dip is merely a result of seasonal trends.

Derren Martin, the director of valuations at Cap HPI, spoke to Car Dealer associate editor James Batchelor about the recent developments in the trade sector. Martin acknowledged that July has been a somewhat challenging month for dealers, with some expressing mild disappointment in their performance. Yet, he believes this downturn is not a cause for alarm, given that it's more in line with traditional pre-Covid times.

The 1.9% decrease in values, equivalent to approximately £350, was somewhat above the usual trend for a July, making it the largest drop observed so far this year. Martin stressed that despite this, there's no reason to panic, as 2023 remains the fourth-strongest year in terms of performance over the last decade or so. He characterised the situation as a "realignment of values" rather than a crash or any extreme market disruption.

Several factors contribute to this recent decline. For instance, many people are going on holiday during this period, leading to fewer buyers in the market. Additionally, dealers are being cautious as they have an eye on September and the plate change, opting not to overstock their inventories.

Martin emphasised that the drop in prices has been gradual, and even with the recent decrease, used car prices remain significantly higher than they were before the Covid pandemic. On average, values have risen by nearly 30% over the past three to three and a half years, with some specific models even seeing a staggering 70% increase.

Delving deeper into the data, Martin pointed out that hybrids experienced a 2.1% drop, while electric vehicles (EVs) saw a slightly larger decline of 2.8% on average. He highlighted the example of Citroen's C-Zero, which recorded a 10% drop, equivalent to £750. While this may sound substantial, Martin reassured that it's a reasonable amount considering the broader market dynamics.

Regarding EVs, dealers are exercising caution and not overstocking, with Martin advising a measured approach: "I would be dipping my toe in, not overdoing it."

Looking ahead to August, Martin anticipates further minor price slips, likely around 1.5%. However, he remained optimistic that this realignment would not be significant or problematic. He believes it will largely continue the trends observed over the past couple of months. Moreover, the market might see increased volume coming back in September, potentially affecting prices.

Factors such as high interest rates and the end of fixed-rate mortgages have led to some consumer wariness. Nevertheless, the necessity of purchasing a used car will persist, ensuring that the market remains resilient. While values may continue to decrease slightly, they are expected to remain higher than the levels seen three and a half years ago, reflecting the ongoing market dynamics.

In conclusion, the recent 1.9% drop in used car values may raise some eyebrows, but experts are confident that this is a part of a natural seasonal adjustment. Dealers need not worry, as the overall performance in 2023 remains strong, and the market is experiencing a realignment rather than a significant downturn.

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