Why Good Used Cars Are About to Get Harder to Find and More Expensive

If you are planning to buy a used car in the next year or two, the window for a good deal on a nearly new model may be closing faster than you think. Fresh industry data shows the supply of three to seven year old cars, the sweet spot most family buyers aim for, is about to fall off a cliff. The shortage traces straight back to the pandemic, and it is set to push prices for the most sought after used cars upward even as electric models keep getting cheaper.

For anyone weighing up a purchase, the message is simple: the type of car you buy, and when you buy it, will matter more over the next two years than at any point since the chip shortage. Here is what the numbers show and how to use them.

The supply cliff edge that is coming

According to analysis from Auto Trader, the UK’s largest car marketplace, the volume of five to six year old cars in the market is set to drop by 25 to 30 per cent in 2026 compared with 2024. The situation is expected to worsen in 2027, when the fall could reach 35 per cent for cars aged five to seven years.

The cause is not mysterious. During the pandemic, around 2.5 million new cars that would normally have been built and sold in the UK never were, as factories shut and a global semiconductor shortage throttled production. Those cars were never registered in 2020, 2021 and 2022, which means they are not arriving on the used market now as three, four and five year old stock. That gap, which first hit the youngest used cars, is steadily maturing into the older age brackets, and it is now creating what Auto Trader calls a cliff edge for middle aged stock.

Marc Palmer, Auto Trader’s Head of Strategy and Insights, put it plainly. “The pandemic gap is moving through the market, and we expect a sharp drop in the availability of five to seven year old vehicles over the next couple of years,” he said. “The demand is there, and on our platform the audience is there, but the cars might not be the ones you’re used to selling. Success in 2026 will come to those who use data to identify the new pockets of profit, diversifying into different ages and fuel types, rather than waiting for the old supply chains to return.”

What it means for prices

Less supply of the most popular cars, with demand holding firm, points in one direction for prices. The market is already running hot. Auto Trader’s Retail Price Index, based on 800,000 daily observations, put the average price of a used car at £17,294 in January, the highest monthly average since November 2023 and up slightly year on year. Cars are selling quickly too, taking an average of 41 days to leave forecourts.

Petrol cars show the squeeze most clearly. The average used petrol car price rose for the tenth month in a row, up 1.5 per cent year on year to £15,039, because demand has stayed ahead of a shrinking supply. Even older cars are climbing: the 10 to 15 year old bracket saw average prices rise 9 per cent year on year to £6,949, as buyers priced out of newer stock look further down the age range.

That tightening sits awkwardly alongside another problem facing recent buyers, with many people who bought on finance now owing more than their car is worth as values shift. We covered that squeeze in our report on why millions of drivers are in negative equity on their car finance, and a firming used market for petrol and diesel could ease it for some owners while leaving EV owners more exposed.

The electric exception

There is one big exception to the supply squeeze, and it works heavily in buyers’ favour. Used electric cars are getting cheaper, not dearer. Demand for used EVs rocketed more than 16 per cent year on year in January, but supply rose at more than twice that rate, up 33.1 per cent, as the wave of cars first leased when EV sales took off now returns to the market. The result was a 7.2 per cent fall in the average used EV price, to £23,678.

Electric cars are also the fastest selling fuel type, leaving forecourts in just 38 days on average, and three to five year old EVs, where prices are now on par with their petrol equivalents, sell in only 34 days. That tells you demand is strong enough to absorb the extra supply, and that the value on offer is being recognised by buyers. Specialist data firm cap hpi has reported the used EV market entering a more stable phase than the volatility of recent years, with stronger residual values and faster retail sales. The shift has been striking enough that used EV sales recently hit record levels, as we reported in our piece on why used electric car sales just hit a record high.

The price extremes underline how uneven the market has become. Among the biggest fallers over the year were the Ford Explorer, down almost 25 per cent, and the MG4, down more than 15 per cent. At the other end, classic and enthusiast models such as the Audi A3 Cabriolet and RS6 Avant rose around 20 per cent, showing that scarcity, not just fuel type, is driving values.

What this means for you

If your heart is set on a three to five year old petrol or diesel car, the case for buying sooner rather than later is strong. The supply of exactly those vehicles is forecast to shrink through 2026 and 2027, and tightening stock with steady demand is a recipe for firmer prices. Waiting could mean paying more for less choice.

If you are open minded about fuel type, a used electric car is currently one of the few genuine bargains in the market, with prices falling and plenty of supply. A three to five year old EV now costs broadly the same as the petrol equivalent to buy, but far less to run if you can charge at home, and concerns about battery life have eased as data shows most packs holding up well over time.

Whatever you choose, do the homework that protects you in a seller’s market. Get any car’s history checked for outstanding finance, write off markers and mileage discrepancies before you commit. Use online valuation tools to sense check the asking price against the wider market, because in a tight market some sellers will test optimistic figures. And if you are part exchanging, the same forces lifting the value of popular used cars should work in your favour on the car you are giving up, so do not accept the first trade in figure without shopping it around.

The bottom line is that the era of falling used car prices across the board is ending for the cars most people want. Electric models remain the outlier where value is improving, but for mainstream petrol and diesel buyers, the cheapest day to buy may well be today.

Sources:

• Auto Trader: Used car market enters 2026 with surge in buyer engagement, but supply headwinds loom
• Motor Trader: cap hpi reveals strength of used EV market