A shortage of electric vehicles (EVs) entering the used car market will drive residual values higher, according to analysis by Indicata.

Battery electric vehicles (BEVs) were the UK’s fastest-selling used cars in July, but there is a limited supply of used EVs is entering the market caused by leasing fleets continuing to extend contracts, rental companies retaining rather than de-fleeting their stock and dealers retaining part exchanges, says Indicata.

“Used EVs have been in high demand during the summer months which is likely to leave the market with a supply shortage,” explained Jon Mitchell Indicata UK’s group sales director.

“The pent-up demand will push prices up even further.

“The danger is that second hand EVs will begin to compete with the growing number of cheaper new EVs coming into the market.

“That will leave retail buyers with a decision on whether to buy a new EV or used EV,” he added.

Indicata’s report confirms that levels of used car stock were 3% down between 1 July and 1 August which contributed to sales falling by 10% in the first seven months of 2022 compared with 2021.

Sales were also down 6.4% on the same period in 2019 which was the last pre-Covid year.

The warning comes as UK used EV sales increased by 57.1% in Q2 this year, but it wasn't enough to stop an 18.8% drop in the market overall, according to the latest data from the Society of Motor Manufacturers and Traders (SMMT). 

BEV sales rose to reach 16,782 units, doubling market share to 1%, while plug-in hybrids held relatively stable with 1% growth and 0.9% of the market. 

Hybrids (HEVs), meanwhile, declined by 4% with 2.4% of the market. As a result, used petrol and diesel vehicles remained dominant, totalling 1,682,280 units and accounting for 95.6% of sales.

The total used car market in Q2 saw 1,759,684 cars changing hands, which equates to 407,820 fewer transactions over the same period last year.

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