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The challenges for an online-only used car retailing model have come into clear focus over recent months, and this has escalated as we move into 2023.

On January 3, it was announced that the New York Stock Exchange (NYSE) had begun the process of de-listing warrants for online car retailer Cazoo due to “abnormally low” price levels. While the business can continue to trade normally, it adds uncertainty to a business whose shares stood at $0.18 on the day of the announcement. The price reflected a fall in value of 96.5% decline over the past 12 months.

Significant efforts have been made to reshape the business model to become profitable. However, concerns about its longevity continue to be reflected in falling investor confidence.

Cazoo’s woes are similar to those of the US Carvanna business upon which Cazoo is broadly modelled. It has gone from chasing growth to slashing operating costs and cutting staff. Increasingly this looks like a late move for survival at risk of failure. In December, Carvana’s largest creditors signed an agreement to negotiate debt restructuring together. It was a move that raised the spectre of imminent bankruptcy.

The other major online used car retailer in the UK, Cinch, is also facing challenges. Its latest accounts published on January 5 for the year ended April 3, 2022, revealed a pre-tax loss of £149.1m pre-tax loss, or £126.7m after tax. In the preceding year, losses were £22m.

Cinch points to long-term plans in its accounts, designed to have long-term benefits. The challenge Cazoo and Carvana face is whether investors are happy with a long-term return; the same could also prove to be a challenge for Cinch.

In so many ways, the lockdown conditions created by Covid appeared ideal for an online model. Arguably, the opposite has proved to be the case. Bricks-and-mortar retailers were forced to embrace online but did so by creating an omnichannel model that enabled consumers the opportunity to visit a dealer and test drive a car. A simple but vital difference as the UK re-opened.

Another difference was market empathy. To succeed, used car retailers must buy right to sell right, act with agility and keep a close eye on cash flow, which is critical in a low-margin business that retails depreciating assets. The online retailers have invested heavily in brand building, and while their brands are widely known, it has been at a considerable cost.

It is too early to say that online used car retailing is not viable. Some buyers like the model and perceived lack of ‘faff’, but when an established omnichannel retailer can offer online/offline and a physical and accessible presence for aftersales (that was not part of Cazoo’s initial model), then you have to reflect it is the traditional dealer with an omnichannel capability that offers the greater choice.

I am left to reflect that traditional retailers learnt quickly from the new start online retailers (classic agility) but that online retailers have learnt far more slowly from conventional retailers. In the immediate future, this is the difference.

Debbie McKay, Commercial Director of Motor Sales

Hear from Commercial Director of Motor Sales, Debbie McKay, on what the future could hold for online only retailers. 

Online only used car retailing continues to struggle

The cost of living crisis is a daily news item that continues to cause concern. Inflation has been driven initially by spiralling utility prices and changes in the global economy sparked by the Covid-19 pandemic. The UK is not alone; the position is similar worldwide.

As we start Q1, we have pulled together a high-level 'state of the economy' report based on five crucial factors; inflation, mortgages, grocery costs, utility costs and interest rates. It is designed to create a snapshot of the broader economy and how it impacts people looking to buy a car and source finance.

In short, while interest rates may not yet have peaked, inflation may have done with encouraging signs that utility prices may start to decline. There is plenty of scope for change, but as we start 2023 economically, there is room for optimism as we look ahead.

Inflation is measured by the Office for National Statistics (ONS) and is based upon a 'typical' basket of goods defined by the ONS. There are two measures used by the ONS, the Consumer Prices Index, including owner occupiers' housing costs (CPIH) which rose by 9.3% in the 12 months to November 2022, down from 9.6% in October and the more commonly used Consumer Prices Index', or CPI, which excludes housing costs, which fell to 10.7% in November, down from 11.1% in October. Both are well above the Bank of England target of 2%.

In its November 2022 Monetary Policy Committee report, the Bank of England predicted that inflation would decrease below 10% after March 2023 before dropping below 2% in the first half of 2024. It expects that by the end of 2023, inflation will be between 5% and 6%.

For most mortgage borrowers, changes in the Bank Rate have had no effect on their mortgage rate in the short term. Currently, 74% of homeowner mortgages are on a fixed rate contract, with 96% of new borrowers choosing this option since 2019. Therefore, most borrowers will see no immediate increase in their monthly repayments.

Grocery price inflation for December stood at 14.4%, down slightly from 14.6% in November. It was the second month in a row that grocery price inflation had fallen, raising hopes that the worst has now passed. However, it's still a painfully high figure.

Rising utility prices have been the primary driver of inflation, and their impact on people and businesses has then fed into broader price rises. It appears there is room for optimism looking ahead.

Natural gas prices closed at a 15-month low in the first week of January due to mild weather, an influx of liquified natural gas (LNG) and high gas storage levels.

The net result sees forecasters suggesting that the energy price cap, which dictates what suppliers can charge for gas and electricity, will fall as low as £2,600 per year from July. Well below previous predictions, it would mean that households' utility bills could be hundreds of pounds less than feared.

In December, the Bank of England increased Bank Rate to 3.5%, the ninth consecutive rise. At the same time, the Bank advised borrowers to prepare for fresh increases in the new year. While further rises seem likely to help stem inflation, forecasters believe it could peak at 4.5% in 2023.

The effective rate on new personal loans to consumers increased by 64 basis points to 7.87% in November, the highest level since December 2017. Since then, the Bank of England Bank Rate has increased, as noted above.

Chris Rowthorn, Director of Motor Sales Operations


Kickstarting the year, we're looking at five crucial factors impacting the industry; inflation, mortgages, grocery costs, utility costs and interest rates.

Q1: cost of living impact

The EV market hit a bump in the road as 2022 came to a close, but will it damage the uptake of EVs as we move forward? In the medium to longer term, I doubt it, but there are short term issues in what is an immature market, as used EVs find their value, a position not helped by the high costs of used EVs, notably BEVs if there is a short-term issue.

Vehicle Excise Duty or road tax as we also know it. Currently free for EVs, this will change in 2025 following the Autumn Statement on November 17th.

From April 1st 2025, all EVs will be subject to the standard road tax rate, currently £165 per year. EVs with a list price of £40,000 or more will also pay the £355 premium car tax rate. When combined, this will mean an annual charge of £520. It will also be retrospective and apply to cars first registered from April 1st 2017. On the one hand, it can be argued that this will impact EVs; it will undoubtedly take away one of the benefits, but in real terms, it is just cost-neutral versus an ICE option.

Increased used EV supply and the cost of living crisis

SMMT tells us that in Q3, the used car market fell for the second consecutive quarter, declining by 12.2%. However, used battery electric vehicles rose 44.1%, and hybrid electric vehicle sales were up 2.5. Plug-in hybrid sales, however, fell -5.8%. All good, but we must recognise that the increase was from a low base, especially for BEVs. 

Into Q4 and CAP HPI data highlights that the volume of all EV types into the used wholesale market has trebled compared to 2021. The influx of used EVs with their typically higher price is having an impact on activity. From an auction days perspective, EVs average 20 days compared to 10 for ICE vehicles. It is here that we can see the cost of living impact. EV values have come under pressure and recent data suggests that the greatest month-on-month falls in vehicle values are led by EVs.

The average auction price for an EV up to 3 years old is £12K higher than a petrol car. In the 3-5 category, it is £15.3K higher. With our findandfundmycar.com data pointing to a hotspot monthly payment range of £200 - £250 PCM, EVs are proving expensive, even if, over time, the running costs are likely to be lower.

Right now, range and arguably charger availability remain consumer concerns, add to that the price premium being charged for EVs, and in the prevailing market, the increased supply is searching for more than ‘early used EV adopter’ demand.

There is a changing guard in terms of power plants, and the new car market is starting to be dominated by EVs.

According to research by EY, EV sales in the US, China and Europe will outstrip all other engines five years sooner than previously expected. More tellingly, Auto Trader data suggests that from 2026, more electric cars will be sub-five-year-old than petrol or diesel, with the volume of three-five year old stock being predominantly EV by 2030.

The reality is that EVs will dominate the used car market in a few short years because they will be the cars that dominate the new sector, and that momentum shift can only increase from here on.



The EV market hit a bump in the road as 2022 came to a close, but will it damage the uptake of EVs as we move forward? Hear from Commercial Director of Motor Sales, Debbie McKay. 

News - January 2023

Online only used car retailing continues to struggle

Q1: cost of living impact

The used electric vehicle outlook

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