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European Used Car Market Faces Downward Pressure on Residual Values

The residual values (RVs) of used cars in major European markets are undergoing a significant decline, particularly for electric vehicles (EVs), while prices for internal combustion engine (ICE) vehicles remain relatively stable.

Key Trends by Market and Vehicle Type:

Germany (2025): New car list prices increased by 6.9% year-on-year, while the new car market shrank 4.7% in H1 2025. BEVs' residual values fell significantly, retaining only about 37.1% of their value after three years, compared to about 49-50% for petrol and diesel cars. Used car wholesale values declined by 4.8% year-on-year in Q1 2025, but retail prices remained fairly stable. BEVs take longer to sell, reflecting weaker residual value demand.
Overall European market: Increasing pressure on RVs due to a flood of Chinese EV imports leading to price wars and increased competition. Used car RVs expected to remain under pressure through 2025 and 2026, although average used car prices are still above pre-pandemic levels. Spain is an exception where RVs are holding up better, possibly due to higher demand or supply constraints. Cross-border remarketing is rising as dealers and fleet operators seek better RV outcomes outside saturated local markets.

Broader Factors Affecting Residual Values:

Supply constraints & chip shortages have historically raised used car prices, but recent recovery in supply is starting to lower wholesale prices.
New car price increases partly support used car prices, but the shrinking new car market dampens overall demand.
Lease market dynamics: High used car prices reduce residual value risks for auto leases, as lessees are more likely to buy at lease end, improving recovery values.
Shift in consumer preferences and market saturation of EVs: Growing EV supply, especially from lower-cost Chinese models, is pushing down BEV residual values.
Economic conditions and consumer spending weaknesses in certain regions indirectly affect European markets via global supply chains and OEM strategies.

Summary Table of Residual Value Trends and Influences:

| Factor | Impact on Residual Values | Notes | |--------------------------------|----------------------------------------------|---------------------------------------------| | Rising New Car Prices | Supports used car RVs generally | Due to inflation and supply constraints | | BEV Residual Values | Significantly falling in Germany and Europe | ~37% after 3 years vs 49-50% for ICE cars | | Chinese EV Imports | Pressure downward on RVs due to price wars | Increased competition forcing innovation | | Used Car Market Dynamics | Wholesale prices falling, retail stable/decreasing | Used cars selling faster but prices falling | | Auto Lease Market | High used-car prices reduce residual risk | More lessees buy at lease term end | | Regional Variations | Some markets like Spain resist RV decline | Possibly due to local demand/supply balance |

Market-Specific Developments:

Austria, France, Germany, Italy, Spain, Switzerland, and the UK experienced significant year-on-year declines in the average value retained by a three-year-old car at 60,000km.
The two biggest RV drops were seen in Austria and the UK. Austria's RV was 47.7% in November, a 6.2 percentage point drop from the previous year and a 2.3 point drop from October. The UK's RV was 51.1% in November, a 6.2 percentage point drop from the previous year and a 0.5 point drop from October.
Spain had the smallest year-on-year RV decline out of the seven markets, with values at 58.9%.
Two-to-four-year-old passenger cars sold slightly quicker than in October in the UK, spending 82.6 days in stock on average. All-electric vehicles took 26.2 days to sell on average, just over eight days faster than the overall average.
BEV %RVs increased in November by 0.5pp as their popularity in wholesale channels continues to grow in the UK.
RVs of 36-month-old cars at 60,000km decreased again in Switzerland, with %RVs falling slightly to 46.8% in November from 47% in October.
Spain's new-car market is growing very slowly, with registrations increasing by 7.2% compared to 2023 in October. HEVs retained the most value in November, with a %RV of 51.1%.
France's RVs dropped slightly in November compared to October, with three-year-old cars retaining 53.9% of their value, a 0.3 percentage point drop.
Switzerland had the lowest RV level out of the European markets covered, with values dropping from 47% in October to 46.8% in November, a 3.1 percentage point drop from the previous year.
The Italian government has announced that its incentive scheme will be discontinued in the coming years, which may lead to slightly less pressure on used car values.

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