IQ

Insight

Quarterly

Q1/2025

2025 is set to mirror many of the trends we became accustomed with in 2024. Dealer consolidation continues to reshape the landscape, heavily influencing how vehicles are sourced and distributed, while the used car parc shifts and consumer demands wax and wane. Despite prevalent challenges, optimism remains, with hope for better price stability and incentives to drive EV adoption across the European used market.

Ripple effects from an evolving fuel type make up

Much like the trends we are witnessing in the new market, the evolving shifts in vehicle fuel types are being felt similarly in the used market. Understanding the impact of these changing fuel types is becoming increasingly critical for anyone working in the industry, as electric vehicles (EVs) and hybrids gain prominence.  

EVs and hybrids are expected to see substantial growth in their share of the car parc by 2028. Both plug-in hybrid electric vehicles (PHEVs) and hybrid electric vehicles (HEVs) are projected to increase their share by 87.37% while EVs will increase by 177.45%. Meanwhile, petrol cars will see a minor decrease in the same time period by approximately -5.97%.  

“The lack of consumer demand for expensively priced EVs has, no doubt, adversely impacted appetite to acquire through the traditional dealer channel. However, we should see another overall increase in new vehicle registrations this year and dealers will hope to reverse this trend and better compete against the fleet market. Their efforts could be supported by the increasing number of smaller, more affordable vehicles available in manufacturer’s product ranges, coming to the market via a combination of mainstream manufacturers and competition coming from lower entry cost Chinese brands,” comments Lee Swinerd, Director and Head of Automotive at Interpath.  

In a market shaped by constant competition, forecasting valuations and their impact on residual values is vital for the modern-day dealer. With accurate insights into the direction of the market, retailers can define a competitive pricing strategy.  

Pricing stabilisation

Vehicle prices in the UK are beginning to stabilise, with EVs heavy depreciation now easing. There are early signs of levelling as retailers begin to acknowledge consumer value and shorter days to sell. Following a sluggish start to the year, we are now seeing trade values firming up with first-time conversion rates and overall performance against CAP Clean increasing, especially in the lower price bandings.

Electric Vehicles - Sold Price as a percentage of New Car Price

Source: Manheim Auction Services

In the first quarter of the year, we expect values to stay strong due to the supply gap from recent years of low registrations. This is likely to continue into 2026 until prices begin to return to standard depreciation patterns. As interest rates and inflation hopefully stabilise further this year, consumer demand is likely to increase in line, a positive development for those in the used market.  

Despite progress in building the UK’s EV car parc, challenges remain. The used market for these vehicles is expected to remain fragmented as they are generally priced lower than their internal combustion engine (ICE) counterparts, posing challenges when it comes to retaining their value. This combined with regulatory pressures, including VAT charges on charging, the changes to BiK rules for PHEVs from 2028/9 and the prospect of road pricing means that an air of uncertainty lingers around the used electric market.  

“As used EV prices are realigning with their ICE equivalents, there will be opportunity for dealers on used cars to leverage the wave of 2022 and 2023 registered EVs coming off PCP and lease deals. Yet, no matter what happens in the automotive world, dealers will also need to be mindful of the pressures facing almost all business leaders right now in the UK. Managing costs after the increases to National Living Wage and National Insurance Contributions will be critical and emphasise the need to seek to maximise income and profits from servicing and parts.” continues Lee Swinerd.  

H1 2025 will likely be a challenging start to the year with volumes easing as we move into the second half.  

Major shift in diesel vehicle ownership

Although petrol ownership is projected to remain relatively stable, the same cannot be said for diesel. The share of diesel in the car parc is projected to decrease significantly by 2028, driven largely by stricter emissions regulations and shifting consumer preferences. Looking back at 2024, as little as 123,000 new diesel vehicles were registered compared to 1,065,879 in 2017. This trend will filter through into the used market, limiting the supply of newer diesel models but also declining consumer interest in this vehicle type.

The view from Europe

Challenges surrounding used EVs extend into Europe, with Germany, Italy and France are all experiencing slow adoption of EVs in the used market. Spain shows promise, with greater stability in used car prices. EVs are gradually increasing, especially in the LCV segment. This outlook points towards a steady, albeit slow, shift toward electrification.  

• Spain – Electrification is experiencing gradual growth, but hybrids continue to outperform EVs in market share and pricing stability.  

• Germany – Diesel and petrol vehicles continue to dominate the market, but cautious optimism remains as upcoming legislative incentives and the growing resale value of older EV models could bring stabilisation.  

• Italy – EV adoption remains slow. Hybrids are gaining traction, but the transition is sluggish. Significant policy support and consumer incentives are essential to boost electrification.  

• France – A resurgence in diesel popularity has presented a significant blocker for electrification progress. Hybrids are maintaining better marketability. This indicates a steady shift toward hybrid adoption, with EVs requiring greater incentives to compete with ICE alternatives.  

Staying ahead in 2025

Supply and demand are central to the dynamics of the used car market, but successful retailers must go deeper. Stock profiling – ensuring the right mix of vehicles aligns with market needs – and strategic stock sourcing are now more crucial than ever. Retailers must adapt to these shifting dynamics and ensure that they can meet the diverse needs of consumers, all while navigating the challenges of a transforming automotive landscape.  Leveraging data effectively to anticipate trends and consumer preferences can give retailers a competitive edge.

Used vehicle parc forecast 2024 - 2027

Source: Cox Automotive