USED CAR PRICE GROWTH REMAINS AT RECORD LEVELS, BUT DEMAND SOFTENS ON RECORD 2021

The latest Auto Trader Retail Price Index, which is based on daily pricing analysis of circa 900,000 vehicles, revealed that the average price of a used car increased 32.2% on a year-on-year (YoY) and like-for-like basis in April, marking 25 consecutive months.

The slight slowdown in price growth is the result of a number of factors, not least the fact that growth is now overlapping last year’s already very strong levels (7.1%). Further contributing factors include a softening in consumer demand, which has been fuelled by the rising cost of living, growing consumer concerns around the economy and the prospect of a significant reduction in disposable incomes.

However, whilst consumer demand has begun to decline, any comparisons made with 2021 will be heavily distorted due to the exceptional and ‘once in a lifetime’ levels the market experienced last year as we exited the third UK COVID lock-down with a high level of pent-up demand. It would be more accurate to compare the current market with pre-pandemic levels, and according to the latest data from Auto Trader, audience and activity on site remains strong, with the volume of advert views on its marketplace increasing 17% on April 2019. Any suggestion therefore that the market is in reverse is incorrect; rather, it is returning to more typical market conditions.

Some segments outperforming wider market

Looking at the pricing data on a more granular level, it’s evident that specific market segments can show variable trends determined by different market dynamics, which highlights the need for the industry to look beyond the national average view. For example, on a month-on-month basis, the average 10-15-year-old petrol saloon saw a price increase of 5.4%, whilst a petrol saloon car aged 3-5-years-old, saw prices contract almost 1.5% over the same period.

Commenting on April’s performance, Richard Walker, Auto Trader’s Director of Data and Insights, said: “In such a fast-moving market, it’s easy to lose sight of just how exceptional 2021 was for the industry, but context is critical and any suggestion that the used car market is in reverse or prices are set to tumble, is at best an oversimplification, and at worst a misinterpretation of the data.

“Whilst stock limitations have impacted sales, compared to ‘normal’ pre-pandemic conditions, consumer demand, engagement, and prices all remain robust, which in turn is helping to drive strong margins. Our data highlights many segments of the market are perform at varying degrees – it’s vital therefore that during this period of turbulence, retailers look beyond a national average view and adopt a strategy that is led by data to identify and to focus on those areas where they can win.”

Sue Robinson, Chief Executive, NFDA, added: “Despite a stabilisation mainly due to the cost-of-living increases affecting UK households’ finances, it is encouraging that demand for used vehicles remains above pre-pandemic. As a result, despite a slight slowdown in growth, used car prices are still at high levels. It is positive that electric cars continue to perform well as franchised dealers work hard to help their customers to switch to a greener vehicle”.

Top 10 price growth (all fuel types) | April 2022 vs April 2021 like-for-like

Top 10 price contraction (all fuel types) | April 2022 vs April 2021 like-for-like