Values in the used car market are becoming more volatile, according to a study from vehicle valuation firm Cap hpi.
The research found March and August to be the most volatile months, while January was marked as the most stable. Cap hpi reported a market realignment through the first half of the year with values dropping after an unusually strong 2018.
The declines slowed in August as the market stabilised with a fall of 1%, the smallest decline since March.
Derren Martin, head of UK valuations at cap hpi said: “The data shows the used car market is becoming more complex and volatile. Used vehicles reach the wholesale market through a multitude of routes that all impact on values. We also see the pace of the market accelerating as vehicles from the fleet and retail sectors are remarketed faster than ever.”
Cap hpi noted a drop in used values greater than the same month in the previous three years. Value data at the firm also points to a more stable period ahead as demand and values are more closely aligned.
Average diesel car values are consistently dropping by more than their petrol counterparts, with August seeing a 1.1% fall compared to 0.8%.
Martin said: “With the increasing number of models, powertrains, options, and acceleration in generations, it’s clear that the used market will only become more complex as time progresses. And while we don’t expect any major shifts in the overall market, we are seeing an increasing disparity and volatility between makes, models and powertrains as consumer tastes shift.”
Recent research from cap hpi found that customers who have taken out personal contract purchase (PCP) contracts are not at risk of negative equity.
Negative equity can result in financial difficulties for consumers, but Andrew Mee, UK head of forecast at cap hpi, said PCP will not experience the same fate as other financial products.
Mee said: “PCP is a really useful tool for motor manufacturers and dealers. From the consumer’s perspective, they are not really impacted in negative equity in the same way that they were years ago with other financial products, because if the market has moved so that the used value of the vehicle falls well below the guaranteed future value (GFV), they can just hand back the car and the risk passes on to the dealer or finance provider.