The UK used car market is expected to lag pre-pandemic levels until 2027

The UK used car market is expected to see only modest growth in the coming years, with transactions expected to increase from 7.4 million in 2024 to just under 7.9 million by 2027, according to the latest analysis from Cox Automotive.

Baseline projections for 2025, shared in Cox Automotive’s Insight Quarterly (IQ), indicate 7,458,356 used car transactions, a marginal increase of 0.3% from 2024 levels.

This moderate trajectory highlights a market still lagging pre-pandemic trends and constrained by economic pressures and continued supply limitations.

Cox Automotive’s baseline accuracy for 2024 (through the end of the third quarter) was 96.7% and 99.6% for its upside forecast.

“Demand for used vehicles remains stable, but the UK car fleet is contracting and overall vehicle registrations and transactions remain below the record levels seen from 2002 to 2008 and 2014 to 2019,” said Philip Nothard, director of Cox Automotive Insight.

He continued: “Our forecasts highlight the enduring appeal of used vehicles, but also underline the reality that this sector, like much of the wider automotive market, faces continued pressures as Consumer priorities are changing and the automotive landscape continues to adapt.

The influence of zero-emission vehicles

The evolving market landscape is heavily influenced by the growing number of new energy vehicles (NEVs) as well as changing production strategies of original equipment manufacturers (OEMs).

As more manufacturers prioritize NEVs, the availability of traditional internal combustion engine (ICE) vehicles is expected to gradually decline.

Nothard says there’s still a long way to go to get more dealerships to stock electric vehicles, but those who have become early adopters are seeing some models retain their value and even move off the forecourts faster than some of their ICE equivalents.

Along the same lines, forecasts also predict significant growth in NEV adoption in the used market, with battery electric vehicles (BEVs) increasing their share of transactions by over 50% at the start of 2024.

Despite this growth, ICE vehicles still dominate, especially given consumer concerns about EV charging infrastructure and affordability. However, BEV registrations in the used market are expected to increase from 21% to 34% by 2027, indicating a slow but steady shift in consumer preferences.

Even though the used car market is experiencing gradual growth, it remains constrained by the current economic situation.

Modest cuts in UK interest rates are expected over the coming years, although inflation remains above historical averages, limiting consumers’ purchasing power.

As a result, affordability will be a major factor in consumers’ decisions, with many buyers viewing used cars as a more financially viable alternative to more expensive new vehicles.

“Our data suggests that economic pressures will continue to influence consumer behavior,” says Nothard.

“As new car prices rise, affordability issues and strong demand for lower-cost alternatives are expected to keep used car sales steady. With continued supply constraints and a shrinking vehicle fleet, we expect vehicle values ​​for certain in-demand segments, particularly ICE, to remain elevated.

UK car park to fall by almost 5% over next three years

Over the next three years, the UK car fleet is expected to decline by around 4.47%.

This shift presents new challenges for an industry that must balance dwindling ICE inventories with growing demand for used electric vehicles. As OEMs move toward lower production of ICE models, consumers may face fewer choices in the traditional fuel category, boosting competition for high-quality used vehicles.

Data from Cox Automotive indicates a critical tipping point for the UK used car market by 2027.

Supply chain challenges caused by the pandemic, which reduced new car registrations by more than three million, have had a lasting impact on the composition of the used car fleet.

Today, as economic conditions stabilize and the supply of new vehicles becomes more consistent, the used market faces continuous change.

While used car transactions in the UK fell by 12% between 2020 and 2023 compared to 2016-2019, forecasts suggest a gradual return to pre-pandemic levels by 2027. As NEV options become more accessible and as consumer interest continues to grow, demand for used cars of all types will likely remain strong.

“The affordability and appeal of used cars will play a central role in the UK’s transition to an electrified future,” notes Nothard.

“The market is evolving, but the resilience of the sector is evident.

“Industry players who proactively adapt to changing consumer preferences and inventory needs will be well-positioned to thrive in a transforming market. But the future certainly won’t be simple.”

The second-hand market remains strong in November despite budgetary concerns

Meanwhile, Cap HPI has added further context around developments in the used car market, with its latest data showing the market outperformed seasonal norms in November, despite concerns over budget and availability disruption car financing.

The value of an average three-year-old vehicle with 60,000 miles has fallen by 1.6%, equivalent to around £280. Since the implementation of Cap Live in 2012, the average change until December is down 2.1%.

The movements notably outperformed the seasonal average every month of 2024, highlighting the robustness of the market this year.

Chris Plumb, Head of Current Car Valuation at Cap HPI, said: “November proved to be an intriguing month for the used car retail sector as several potential headwinds loomed, threatening to disrupt commercial activity.

“The combination of the mid-term holidays, the autumn budget announcement and a crucial court ruling on the payment of undisclosed commissions has created a difficult and uncertain environment for the market.

“The fall budget sparked initial concerns about its potential impact on consumers. However, the immediate consequences seem limited.”

The value of one-year-old vehicles fell by 1.3%, the equivalent of around £400. Five-year-old examples saw a reduction of 1.6%, or around £200, while 10-year-old vehicles saw a slight drop of 1.6%, or around £70.

The weakest sectors after three years remain convertibles and convertible coupes, with reductions of 3.5%, around £740, and 4%, around £640, respectively.

Among traditional sectors, city cars saw the biggest decline over three years, with values ​​down 1.9%, equivalent to £150.

The large corporate vehicle sector demonstrates resilience

The large executive sector emerged as the best performing category after three years, recording only a modest decline of 0.3% or £130.

More than half of the vehicles in this sector have not undergone any value adjustment. The BMW 7 Series, in both petrol and hybrid variants, stood out with a 2% increase, adding between £600 and £680 to used values.

SUVs now account for a third of all vehicle sales data, reaching 60% for models less than three years old.

The average drop in SUV value at this age is 1.7%, which equates to a drop of £300.

Large SUVs see the smallest reduction at 0.6% (£190), while small and medium SUVs face bigger drops of 2.1% (£255) and 1.9% (£350) , respectively.

Petrol and diesel vehicles saw the biggest reductions over three years, with falls of 1.7%, equivalent to £300.

Plug-in hybrid electric vehicles (PHEV) saw a drop of 1.3% (£280), while hybrid electric vehicles performed best, with only a very slight drop of 0.7% (£100).

After leading the market for two consecutive months, BEV fell to the second best performing fuel type in November, with an average decline of 0.9% (£180).

Plumb concludes: “BEV sales volumes have continued to increase strongly, with cumulative figures up 175% compared to 2023 and 370% compared to 2022.

“October set a new record for the highest volume of used BEVs sold in a single month, surpassing the previous peak in July.

“For vehicles less than three years old, BEVs now represent 14% of data sold, making them the second largest fuel type after gasoline, which has a 60% share.

“November’s movements reflect a continued return to typical seasonal declines despite the presence of various factors that could have negatively impacted the market.

“The used car sector has demonstrated remarkable resilience as 2024 draws to a close.”