A significant drop in used-car prices has been blamed after car dealer Caffyns reported a £1.5 million loss in its latest set of financial figures.

The dealership, which has a number of outlets in Ashford and Tunbridge Wells, as well as Sussex, was among many in the trade hit by an estimated 10% drop in used-car prices nationwide - fuelled by an influx of second-hand vehicles into the market.

Caffyns’ sales in used motors continue to increase - up 2% over the 12 months - but their margins were squeezed by the price adjustments.

Despite seeing turnover rise by a healthy 4% in the year ending March 31, to £262.1m (from £251.4m the year before) the impact of the price drops had a “very detrimental impact” - and a reduction of £1.9m in gross profits.

Coupled with higher interest rates, inflationary pressures and increased energy costs, statutory losses before tax were £1.5m - compared to a £3.1m profit the year before.

The second-hand market has been hit by a return, post-pandemic, to full new car production and supply levels. This has seen new car sales fuel more used vehicles entering the market, as motorists trade up, pushing prices down.

Simon Caffyn, chief executive, said: “’Turnover in the year increased by 4% to £262m as trading for new cars and aftersales remained robust.

“However, the used car market suffered a significant price correction in the final calendar quarter of 2023 which, along with interest rates and energy costs at elevated levels and inflationary pressures on the cost base, had a detrimental impact on our second-half performance.”