The used car market saw a 1.4% increase in average values in October, reaching £17,824, according to the latest HPI data. The rise comes amid shifting consumer behaviour influenced by finance costs and mileage trends.
Finance costs affect buyer decisions
Higher interest rates on car loans have made financing more expensive, pushing some buyers towards cheaper vehicles or cash purchases. HPI noted that the average APR on used car finance rose to 11.2% in October, up from 10.8% in September. This has led to a 5% drop in finance applications for used cars compared to the same period last year.
Mileage and write-offs shape supply
Average mileage for used cars sold in October increased to 32,421 miles, up 2% year-on-year. Higher mileage vehicles are becoming more common as buyers seek lower upfront costs. Meanwhile, the number of write-offs (vehicles declared total losses by insurers) has risen by 8% in 2023, reducing the supply of used cars and supporting prices. HPI reported that write-offs accounted for 12% of all used car transactions in October.
According to HPI's report, "The used car market is adjusting to higher finance costs, with buyers prioritising value and lower-mileage vehicles where possible." The data also showed that diesel cars saw a 0.5% price decline, while petrol and electric vehicles held steady.
Outlook for the market
HPI forecasts that used car prices will remain stable in the coming months, with a potential slight dip in early 2024 as more new car supply enters the market. However, the ongoing trend of higher mileage and write-offs may continue to underpin prices.
