It looks like the meter is probably working fine but the voltage you are measuring has a lot of noise on it. This kind of meter works by sampling the voltage several times per second and what it's doing is sometimes seeing low noise and sometimes spikes on the supply.
There are two solutions, one is to wire it directly to the battery terminals which is the lowest noise point in the vehicle although I can't see a power switch on it so that may not be an option. The other is to filter out the noise as it reaches the meter. To do this you really need a bigger capacitor than the ones you have, at least 100uF and preferably 1000uF and they should be rated at least to 35V. Observe the correct polarity or you will get a nasty bang! Don't assume that because the battery is 12V there are no voltages higher than that, lots of vehicle electrics produce spikes on the supply which are far higher. Wire the capacitor directly across the meter wires, do not rely on nearby metal to be a good chassis connection. That will go a long way to stabilizing the reading but if it still jumps around, try wiring a choke in the positive wire, the capacitor must be on the meter side of the choke. Look for values higher than about 10mH, if you can't find anything suitable, get a small audio output transformer and use the wires going to it's primary winding. Leave the secondary unconnected.
Brian.