UK new and used car markets heading for bumper year

Ferocious competition among vehicle manufacturers is driving new and used car sales to their highest volumes since pre-Covid.

Eight consecutive months of growth in the new car market pushed year-to-date sales up by 9.5% between January and the end of July, compared to the same period last year, according to the SMMT. The organisation now forecasts a new car market of 2.18 million registrations in 2026, but warns that manufacturers are “haemorrhaging billions in EV discounts,” as they try to drive demand for battery electric vehicles to avoid even steeper financial penalties for failing to comply with the Zero Emission Vehicle Mandate.

The mandate is currently under fast-track review, despite sales of battery electric cars rising by 28.7% over the first seven months of the year, to account for a 25.3% market share. This is still a long way short of the 33% demanded by the mandate.

The continued high pump prices due to the war in the Middle East have supported demand for both new and used EVs, with more than half (51%) of UK fleets reporting that fuel and energy costs are placing the greatest pressure on their budgets.

The positive news for lenders is that the demand for battery-powered cars is mirrored in the secondhand market, where Autotrader reports that used BEV transactions have risen 67% year-on-year.

Used BEVs are outperforming the wider market in terms of desirability and price performance, according to BCA. But 57% of potential used BEV buyers would not purchase a car without an independent health check of the traction battery, warns Startline Motor Finance.

Appetite for new electric light commercial vehicles is also rising, with their year-to-date market share reaching double figures, at 10.6%, for the first time. However, the SMMT notes that this is still less than half the level needed to achieve the 24% demanded by the ZEV Mandate.

Medium and large vans have helped the new LCV market achieve four consecutive months of growth, although last year’s reclassification of double cab pickups as cars, for benefit in kind tax and capital allowance rules, has seen their sales fall off a cliff.

A different kind of collapse has seen Woodville Consultants, which provided loans to UK law firms to pursue car finance misselling claims, go into administration. Blue Motor Finance, which specialises in the used car market, has also gone into administration, but subsequently been bought Hodge MF, which will continue to run the business.

The commission disclosure crisis rumbles on without resolution, and the Financial Conduct Authority (FCA) has now launched a £2 million national advertising campaign designed to help consumers who may be owed car finance mis-selling compensation to make a complaint for free. Its research found that 27% of car owners lack the confidence to pursue a complaint without the support of a claims management company (CMC) or law firm.

The FCA says it has seen “really significant misconduct” by claims management companies. Since January 2024, the FCA has forced CMCs to remove or amend over 1200 misleading car finance claims adverts. The regulator has also formed a taskforce, in conjunction with the Solicitors Regulation Authority and Information Commissioner’s Office, to crack down on the poor handling of motor finance claims by some CMCs and law firms.