The strong growth in average used car prices has continued into September according to Auto Trader. On a like-for-like basis, there was a 7.4% price increase last week (7th – 13th September) on the same period last year, marking 19 weeks of consecutive price growth.
The price performance has been driven, in part, by the exceptionally strong demand in the market, as highlighted by the record number of daily visits to Auto Trader’s marketplace. Last week saw an average of 2.1 million visits each day across its platforms, which represents a 30% year-on-year (YoY) increase.
Another key factor in price growth is supply, and the ongoing constraints in the market. To understand how these dynamics affect price movements, Auto Trader monitors both demand and supply to give a ‘market health’ calculation. Last week, demand increased 19.7% YoY, whilst supply was down -10.4% YoY, leading to a 33.7% increase in market health and a buoyant, profitable market for used cars.
Retailer pricing behaviour
The health of the market is reflected in the confident pricing strategies being employed by most retailers. Whilst the number of those making price changes and the value of their price adjustments have begun to increase since the end of the lockdown restrictions, they remain significantly lower than pre-COVID-19 levels.
Last week, the average number of retailers making daily price adjustments was 1,158, which is 166 more than the end of August, but it is 15.9% lower than the same period last year. In total, 9,683 cars were repriced during the week, which is 35% fewer than last year. In normal trading conditions reductions average between £250-£550 per day. Last week the average price reduction was £279 which remains at the lower end, and just £15 more than the end of August.
Fuel types
Looking at the data more broadly reveals that average prices for used internal combustion engine (ICE) cars are continuing their strong growth trajectory due to demand outstripping supply in the market. Last week, demand for petrol was up 22.3% YoY, whilst supply was down -5.1% YoY. Similarly, diesel demand recorded an increase of 13.6% YoY, but supply dropped dramatically, down -20.8% YoY. As a result, both petrol and diesel vehicles recorded a like-for-like price increase of 8.0%. It marked consecutive price growth of 28 weeks and 17 weeks respectively, but also the first-time price growth for both fuel types have been level.
Supply and demand dynamics impacted low emission cars too, but in reverse to their ICE counterparts, with supply exceeding demand. Accordingly, prices for alternatively fuelled vehicles (AFV) continued their downward decline, however the rate of contraction is starting to slow. Last week saw the average price of an AFV fall -1.0% year-on-year; a slight improvement on the -1.2% average decline recorded half-way through August, and the -1.7% in July[3].
Age brackets
Looking at the average weekly prices within age brackets, 5-10-year-old cars saw a YoY price increase in prices of 10.8%. This was followed by 3-5-year-old cars (9.7%), 1-3-year-old cars (5.9%) and up to 1-year-old (4.1%).
Body types
In terms of body types, hatchbacks recorded the largest average price growth last week, increasing 11.5% on the same period last year. It was followed by MPVs (8.5%), estate (7.5%) saloon (6.6%), SUV (5.6%), coupe (4.0%) and convertibles (3.7%).
Premium versus volume
In August both premium and volume brands recorded a strong price growth as a result of demand outstripping supply in the market. The average price of used premium and volume cars increasing 6.1% and 10.9% respectively.
Commenting, Auto Trader’s director of data and insight, Richard Walker, said: “From a pricing perspective what we’re observing on our marketplace is a very gradual return to pre lockdown levels, with a small increase in retailers active but across fewer numbers of cars and the adjustments at the lower end of what we would typically see. It’s indicative of the confidence in the health of the market and while demand continues to grow at such robust levels, we’re not seeing any indicators that suggest retailers are under pressure to reduce their prices.
“Contrary to many expectations of a drop in consumer confidence, our research suggests the opposite is it true. In December last year we began tracking consumers’ confidence in being able to afford their next car, and in August this reached its highest rate[1]. What’s more, 45% of consumers on our site said they’re more confident in their ability to afford their next car than they were a year ago. All of these metrics offer a promising outlook, and whilst the rate of growth may begin to ease, we have every reason to believe that both used car prices and sales will remain buoyant during the weeks ahead.”
[3] 13th – 19th July 2020
[1] 8.49 in August 2020 versus 7.73 in December 2019
