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Europe's Used-Car Market Faces Pressure as Residual Values Decline
Europe's used-car market is experiencing a downturn, with residual values (RVs) declining from their 2023 peaks. This trend is primarily due to a weak second-hand market triggered by increased depreciation, rising fleet holding and operating costs, inflationary service cost pressures, and higher interest rates on fleet financing.
In 2024, several factors contributed to the decline in RVs. Depreciation increased significantly, reversing the strong RVs seen in 2023. Higher maintenance, reconditioning, and damage-related costs elevated fleet operating expenses, pressuring used vehicle values. Inflation effects on service providers and rising fixed fees for locations like airports also increased costs. Rising interest rates led to increased fleet financing costs, contributing indirectly to downward RV pressure.
Shifts in consumer behavior with more usership models reduced demand volatility but added complexity. For electric vehicles (EVs), residual values in Germany were notably lower compared to petrol/diesel vehicles, with BEVs retaining around 37.1% of their value after three years, below the overall market average of 48.2%.
Wholesale used car prices fell by about 4.8% year-on-year in early 2025, despite retail price resistance. For 2025, RVs are forecasted to remain under pressure, especially for EVs, amid market adjustments and supply chain challenges, although new car price inflation may partially offset declines in specific segments.
In Spain, the RV of a 36-month-old car at 60,000km fell slightly in December. The average number of days needed to sell a used car increased to 61 days. Spain's new-car market saw a similar result, with levels up 8.4pp. In December 2024, 11.4% of new-car deliveries were BEVs and PHEVs, down from 12% in 2023.
Italy's RVs saw a more positive trend, with %RVs 8.9pp higher last month than in December 2020. However, BEVs in Italy suffered the greatest year-on-year drop in %RVs, averaging 30.5%. PHEVs also saw a significant drop in %RVs, down to 44.3% from 51% a year ago.
In Switzerland, the AMVI decreased significantly by 6.6% from November to December 2024. The %RV of a three-year-old car at 60,000km hit 46.4% in Switzerland in December, down from 49.5% a year ago.
Germany's values were only slightly higher at 49.6%, down from 54.1% recorded in the same month of 2023. The UK was the only major market where RVs bounced back slightly, reaching 51%.
In summary, residual values in Europe’s used-car market declined in 2024 due to increased depreciation driven by rising operating costs, inflation, and interest rates, along with evolving customer preferences. For 2025, RVs are forecasted to remain under pressure, especially for EVs, amid market adjustments and supply chain challenges, although new car price inflation may partially offset declines in specific segments.
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