According to the latest data from Auto Trader, after an initial dip following the Prime Minister’s announcement that England would be entering its third national lockdown, consumer demand remains robust on its marketplace, with the new restrictions having little impact on buying intentions.
During the first three days of the new year, there was a 7% year-on-year (YoY) increase in visitors to Auto Trader, before taking a slight fall immediately following the announcement on the 4th January. However, with an average of 1.8 million visitors a day recorded during the week ending 10th January, levels were still 1.1% higher than the same period last year. And, as people adjusted to the latest restrictions, volumes began to increase, with the number of visits reaching a 4.3% YoY growth over the weekend. Despite the disruption, the number of leads being sent to retailers last week remained strong, with volumes increasing 7.4% YoY.
Affordability confidence reached 2020 high
Research conducted by Auto Trader further highlights the limited influence the recent measures are having on consumer buying intentions. An onsite survey conducted at the end of last month revealed that consumers' confidence in being able to afford their next car had reached a 2020 peak. In fact, 43% of on-site users said they were more confident than they were a year ago, and 50% felt about the same. Notably, the percentage of people saying they were less confident, was at its lowest level (7%) since the start of the pandemic.
Looking specifically at the impact of the government’s latest restrictions, 55% of the 1,466 on site users surveyed last week said they were looking to purchase in the next three months. It marks a significant increase on the 36% of consumers who indicated a three-month timeline when asked the same question in April, and 49% in November. Over a quarter (26%) said they were currently looking to purchase in the next two weeks.
In terms of whether the lockdown had directly affected their timeline, almost 60% said it had no impact on their decision (54%) or had made them want to purchase even sooner (5%). 15% said they weren’t sure, which represents an opportunity for retailers to remove doubt through how they present themselves and their vehicles. 27% of those surveyed said the new rules had made them want to delay their purchase, however, the largest percentage is by three months (42%), which is typical buying behaviour during normal trading conditions.
Separate onsite research also highlighted the value of car ownership as a result of COVID, with 35% of consumers believing that owning a car is more important to them now than it was before the pandemic, which is at its highest point since Auto Trader began asking the question in June. What’s more, 10% of people are still in market to buy a car specifically to avoid public transport.
In a separate piece of research conducted in December, 35% of consumers said that owning a car is more important to them now than it was before the pandemic, the highest level since Auto Trader began asking the question in June 2020.
Retailers urged to hold firm with pricing
According to the latest results from the Auto Trader Retail Price Index, which is based on daily pricing analysis of circa 900,000 vehicles, the average price of a used car in December was £14,085: a year-on-year (YoY) and like-for-like increase of 8.1%. It marks the ninth consecutive month of growth and caps what has been a very strong year for second-hand car prices, which in total increased 4% YoY in 2020; a sharp increase on the 0.5% annual growth recorded in 2019.
Prices have been driven by both supply constraints in the market, and the strong levels of consumer demand, which despite the various lockdowns and restrictions imposed across the UK in 2020, remained robust throughout the year.
Retailers ‘holding firm’
Testament to their confidence in the market, the number of retailers making price changes and the value of those price adjustments made in December remain lower than pre-COVID levels. 1,937 retailers made price changes last month, which was 4.2% fewer than in December 2019, whilst the average daily reduction was £262: -7.6% less than the same time last year. The average number of cars being changed each day was 13,082, which is far fewer than the 17,500 to 24,000 typically adjusted during normal trading conditions.
Electric appetite surges as ICE demand cools
Demand for petrol increased 0.6% YoY in December, whilst the levels of supply grew 3.5%. This minor imbalance, in favour of supply, contributed to the slight easing in the rate of price growth for used petrol cars, slowing from 8.8% YoY in November to a still very high 8.1% last month. The average sticker price was £12,751.
The rate of growth for used diesel prices also saw an easing, albeit a marginal one, slowing from a record 9.2% in November to 9.0% last month, with an average price of £14,741. Demand for diesel however fell, down -7.7% YoY, whilst levels of supply fell even further, dropping -13%.
In contrast, electric vehicles (EV) continue to record exceptionally strong levels of demand. Premium EVs saw demand increase 80.8% YoY in December. However, with a much stronger level of supply in the market, which was up 223.9%, prices contracted slightly, decreasing -1.70% YoY (£46,432). Whilst demand for volume EVs was slightly lower, up 58.7% YoY, the gap between levels of supply was far smaller, at 86.9%, helping to drive average prices up 16.20% (£19,197).