BLOG Is the used market for BEVs stabilising?

Over the last two years, the prices of used BEVs have undergone significant shifts, making it difficult for the industry to build a consistent picture. While there has been some stabilisation in recent months, the market remains fragmented, with wide-ranging value variations between different models, age groups, and market conditions.

Over the past 12 months alone, BEV values have plummeted by an average of 20%. Extending this period to two years paints an even more dramatic picture, with some models losing over 60% of their value. However, the declines are not uniform across the board. Some models have stabilised, while others remain weak, and further deflation is anticipated for a number of models.

The used BEV market will continue to be challenging due to the level of nuance between brands, vehicle sectors, models and technology. However, the reductions in used car values observed over the last couple of years are not expected to be repeated in the near future.

The stabilisation observed in some BEV ranges has already given dealers, and consumers hope that the worst of the price drops may be behind us. However, the broad variation in performance across different BEVs means that predicting future trends remains problematic.

One of the major challenges in the used BEV market is the difficulty of comparing electric models and their internal combustion engine (ICE) counterparts. Currently, over 70 different models are available in the used market where a comparison can be made, each offering a different mix of features, technology, and pricing.

Despite the growing acceptance of electric vehicles, more than 75% of BEV models are now trading at a price penalty when compared to their ICE equivalents: trade prices for BEVs are already cheaper than their petrol or diesel equivalents.

In August, our estimate for the total monthly movement in used car prices at 36/60 was -1.1%. After the first couple of weeks, the movement was around -0.6%, remaining virtually unchanged for the remainder of the month.

The variation by fuel type has reduced; diesel moved exactly in line with petrol at -0.6%, hybrids were the best-performing fuel type at -0.2% and plug-in hybrid cars and electric cars both moved by -1.0%; the same as last month and remaining slightly favourable to typical seasonality for the time of year. At the time of writing, BEVs are currently the best-performing fuel, with values having increased by +0.9%, at three years old, so far during September (compared to a market average of +0.2%).

Some newer BEV models are trading at a premium over their petrol or diesel alternatives, while older BEVs often face larger devaluation. There are no clear trends to guide pricing expectations, which adds to the complexity faced by dealers and consumers alike. Furthermore, new brands entering the BEV space have added to the unpredictability, with their success largely dependent on brand marketing and consumer awareness.

Another factor complicating the used BEV market is the influence of significant new car discounts. Some new electric vehicles are being offered at such competitive prices that they are cheaper than comparable used models, particularly when differential interest rates are factored in.

This situation has further muddied the waters, putting pressure on the value of used BEVs, especially those that haven’t already seen price corrections. The resulting price disparity between new and used BEVs can make it harder for dealers to move stock, particularly nearly new models.

The used market for BEVs is now moving into a phase where we may see a gradual recovery in some cases, although significant new car discounts and other market pressures are likely to keep used prices volatile for some time.

The variation in used car strategies among remarketers is also adding additional uncertainty. Dealers overexposed to particular BEV models face challenges in maintaining prices, while those with more diversified portfolios may fare better. However, across the board, used BEVs continue to sell at a similar rate to other fuel types on dealer forecourts, or in many cases even quicker, indicating that consumer demand remains strong despite, or in some cases because of, the value fluctuations.

This contrasts with dealer demand, which remains relatively subdued; many dealers are still not selling BEVs, having suffered losses from earlier price falls. Meanwhile, those active in the market are selling vehicles quickly and at healthy margins. There are anecdotal signs that some dealers are now returning to the fray, and we expect this trend to continue.

BEVs and consumer sentiment

The outlook for BEV values is clouded by a mix of factors, including government policies, evolving consumer preferences, and the push for more environmentally friendly vehicles. The purported changes in government targets for the phase-out of new ICE cars and light commercial vehicles (LCVs) could create short-term boosts in consumer interest. However, unless there are amendments to existing zero-emission vehicle (ZEV) targets, the impact on trade values will likely be minimal.

Despite the higher upfront cost of many BEVs when new, the lower cost of ownership, driven by lower used car prices, cheaper fuelling and maintenance, continues to attract buyers. Additionally, new clean air zones, like those being introduced this year in Scotland, and the potential expansion of existing zones, will likely fuel increased demand for lower-emission vehicles, including BEVs.

The used BEV market remains highly complex, with no one-size-fits-all narrative, and while the market shows signs of stabilisation, the performance of individual models remains varied, and some are likely to face further depreciation.

Though the immediate future remains uncertain, the long-term prospects for BEVs remain reasonably promising as the transition to electric vehicles accelerates.

Dylan Setterfield is head of forecast strategy at cap hpi