HEADLIGHTS by heycar

Bouncing Back 

Prices of electric cars advertised on heycar have increased for two consecutive months

• 4% in used EV prices from April to June
• 67% increase in EV leads January to June
• Diesel leads consumer demand in June

The average price of an electric used car advertised on heycar increased in the final two months of quarter two, bucking a months-long downward trend.

Month-on-month values rose by 2.0% to £29,947 in May and another 2.0% to £30,557 in June, leaving them 4.0% up on April’s figure of £29,363. It points to a potential end to the slump in EV values, which dogged the used car market from quarter three of 2022.

The increase began two months ahead of a reduction in the energy price cap – the maximum amount energy suppliers can charge consumers per kilowatt hour – from £3,280 in April (or £2,500 with the Energy Price Guarantee, which set maximum prices from October 2022 to June 2023) to £2,074 in July. This was the first time energy prices had fallen in around 20 months, boosting EVs’ appeal.  

June’s average electric car price was 9.8% lower than January’s £33,859 – so far the highest of the year – but it was the first time it exceeded £30,000 since February’s £31,471 average.

heycar data also shows that electric used cars are generating more leads. Though still by far the lowest fuel type by leads (they accounted for 4.4% of all leads in June and 3.3% in quarters one and two), there was a 67% rise in EV leads between January and June.

While greater leads do not directly translate to an increase in sales or prices, they illustrate that used car buyers have shown more interest in second-hand EVs as the year has progressed.

Petrol had the largest share of leads – 34.9% – in the first six months of the year, but also saw the biggest fall of any fuel type at 26%. Diesel had the second-highest number over the same period – 32.4% – which fell by 19%. However, diesel became the dominant fuel type by number of leads in June, with a 32.4% share next to petrol’s 31.9% – the first time the roles were reversed in 2023. Hybrid leads were virtually static in the first six months of the year, up 2.4% from January to June.

The Body Shop 

Q2 change

Coupe            +2.5%

Convertible  +7.1%

Saloon           -0.6%      

SUV                -0.3%

Estate            +1.1%

MPV               +0.2%

Hatchback    +0.5%

• Convertibles advertised on heycar saw the biggest proportionate increase in average price of any body style in quarter two, when they rose by 7.1% from £28,941 in April to £30,993 in June. Such a move is not unusual, as drop-top values traditionally rise as summer approaches.
• Coupe prices made the second largest upward move of 2.5% from £34,985 to £35,854. Estates were third, rising by 1.1% from £24,300 to £24,578.  
• MPVs and SUVs had the most consistent pricing across the quarter. The former’s advertised values increased by 0.2% from £21,152 in April to £21,194 in June, while the latter’s fell by 0.3% from £27,555 to £27,474.
• Hatchback and saloon prices also changed little with quarter two prices up by 0.5% to £17,569 to £17,651 for the former and down by 0.6% from £28,616 to £28,455 for the latter.

Note from the CEO

Who would have thought we would be reporting an uptick in used electric car values in our quarter two edition of Headlights? Months of tumbling prices had turned them into something of a used car market pariah, but it just goes to show how quickly things can change.

To suggest that we are out of the woods with EV residual values would be presumptuous, but I think the really interesting thing is not the prices themselves – it’s that buyers are paying more attention to the cars. Yes, it was from a low base, but a 67% increase in EV leads between January and June means more people are at least considering them as a potential purchase. 

Savvy dealers will take this as a sign that used EVs have a place on forecourts, which will inevitably grow over time. A quick glance at new car sales figures assures us that the ratio of electric to ICE is only going one way, and while we are not giving the all-clear on either EV values or consumer demand, there is no question that they will become far more common in the used car market as the decade progresses. The question, then, is how we make the most of them.

Karen Hilton, Chief Executive Officer, heycar UK

Analysis: Lost the Spark

We ask why the used car market fell out of love with electric cars

Electric car values began falling in autumn of last year, and all corners of the used car market reacted accordingly. Some dealer groups reportedly introduced buying bans on second-hand EVs due to the volatility of their prices, while buyers have been deterred by factors such as high energy costs and that, even against a backdrop of falling values, used EVs remain comparatively expensive next to many petrol and diesel equivalents.

Some, including the Vehicle Remarketing Association (VRA), have pointed to a discrepancy in government incentives for new and used EV buyers, particularly in the company car market. Drivers currently receive extremely favourable 2% benefit-in-kind rates for zero-emission vehicles, which explains why fleet and business buyers accounted for 66.7% of new battery-electric vehicle registrations in 2022 and 74.7% of their volume gain, according to the SMMT.

The VRA argues that there is no UK-wide incentive for used car buyers who, unlike company car drivers, typically buy their vehicle with personal funds or finance, although a government subsidy for used electric cars does exist in Scotland, which offers an interest-free loan of up to £30,000 towards the purchase of a used electric car or van, or up to £5,000 for an electric motorcycle or moped, and consumers must buy the vehicle from dealers to qualify for the loan.

According to data from the Energy Saving Trust (EST), which manages the loans, Scottish local authorities issued used EV loans of £16,700,617 to private buyers and £1,550,590 to businesses between the scheme’s October 2020 launch and the end of 2022.

Out of Interest 

Rising costs have hit consumer spending power, though confidence has improved since Q1

• BofE: consumer borrowing down in Q2
• May withdrawals highest since 1997
• Mortgage rates poised for 15-year high
• GfK: consumer confidence highest in a year

Rising costs and interest rates caused consumers to cut their cloth in quarter two. According to the most recent Bank of England Money and Credit report, net borrowing of consumer credit by individuals decreased from £1.5 billion in April to £1.1 billion in May. It said this was “split between £0.6 billion of borrowing on credit cards and £0.5 billion of borrowing through other forms of consumer credit (such as car dealership finance and personal loans).”

The Bank added that consumers “on net” withdrew £4.6 billion from banks and building societies in May, compared to net deposits of £3.7 billion in April – the highest level of household withdrawals on record since that index began in October 1997. Such a trend is a concern for the car market, because it puts consumer debt in direct competition with funds traditionally used for high-value purchases.

The Consumer Prices Index including owner occupiers’ housing costs – which measures the changes in the prices of goods and services bought by households – was up 0.1% to 7.9% in May. Second-hand cars were cited among the largest monthly contributions to the upward trend, though it named falling fuel costs as the biggest downward contributor.

The above relates to the period before 22 June, when the Bank announced the latest rise in its base rate to 5% (up 0.5%), and there were also signs that motor finance had been directly impacted earlier in the quarter. In April 2023, the Finance and Leasing Association reported that consumer car finance new business volumes fell by 15% year-on-year, while new business by both value and volume was down 8% in the first four months of 2023.

The trend is almost certainly driven by spending pressures in the wider economy. Mortgage rates, for example, hit a 15-year high in July, according to financial analyst Moneyfacts, which reported the average two-year fixed mortgage rate 6.66% – more than the 6.65% peak recorded on 20 October 2022, following the government’s mini-budget, and equal to levels last seen in 2008. It said prices had increased by £167 a month/£2,004 a year on a typical £200,000 25-year loan since mid-May.

Conversely, interest rate rises benefit consumers not at the mercy of a mortgage or mortgage-related rent increases. Individuals with savings, share holdings or pensions – many of whom are older and therefore typically keener on car ownership – will see an improvement in their spending power.

Rising costs within our sector have also put cars front and centre of spending concerns. Market researcher Consumer Intelligence reported in July that quotes for car insurance rose 34% in the year to May, with the average policy costing £1,082 – the biggest annual rise since it began tracking the figure in 2013.  

However, GfK’s May Consumer Confidence Index claimed buyers were more optimistic than at any point in the previous year. Its score of -27 was up from -30 in April, -45 in January and -40 in May 2022. The firm pointed to a strong five-point jump to -8 uptick in how people view their personal finances in the next 12 months.