General overview –
- Used car market is undergoing a very gradual return to a “normal” market rather than a dramatic fall-off in car prices as the industry works through the supply chain pressures which have held back production, despite the rising pressure on consumers from inflation being at a 40-year high.
- Demand – Is coming down from the ‘once in a lifetime’ pent up demand following the third lockdown.
- Supply - Difficult international conditions continue to disrupt the supply of new vehicles into the UK, with around 2million less vehicles being lost from the market over the past two years – A key reason for robust prices in the market.
- 7.5 million used cars sold in 2021 alone, up 11.5% from 2020; yet still 5.5% lower than pre-covid five year average.
- More specifically, used car transactions in Q1 2022 where up 5.1% to 2021 at 1.77 million vehicles changing hands; yet remained 12.2% below Q1 2019.
- Electric vehicles have energised the market, but still remain an extremely small proportion of total used car sales (1%).
- It is safe to assume the used car market will not return to pre-pandemic levels until at least 2023 – primarily due to the ongoing Ukraine crisis and rising financial pressures from the cost-of-living crisis.
- Historically, the used car market has been more resilient in economic downturns, with the new car market taking a lot longer to recover to pre-crisis norm.
- Cost of living squeeze will have an increasingly detrimental impact on demand going forward.
- At the moment Used car price growth remains resilient despite rising inflation pressures.
- The like-for-like price of a used car has risen 28.4% in the past 12 months, marking its 26th consecutive month of year-on-year and like-for-like price growth.
- However, May’s growth is below April’s record 32.2% annual increase and reflects a continued slowing of the pace of price growth with the lowest annual comparison since last October.
- Pre-pandemic prices were already rising at an annual rate of 8%.
- Although, there are signs that the market may be softening with prices falling in 2022. For example, the average asking price of a three-year-old car was £20,017 in June, a figure that's 3.5% lower than the month before and 7.6% down on January.
- Demand for vehicles over five years old softening at a faster rate than newer vehicles with demand turning negative for the first time since February 2021 as the high demand for older cars seen during Covid.
- Q1 2022 - Transactions for BEVs more than doubled from 6,625 to 14,586, a rise of 120.2%. Plug in hybrids (PHEVs) and hybrids (HEVs) also changed hands in greater numbers than the year before rising by 35.3% to 14,433, and 28.8% to 35,007 units respectively.
- Q1 2022- Petrol and diesel powertrains continued to dominate the used market representing 96.2% of used sales. Growth in new EVs over the past two years has yet to have a significant impact on the overall used car market.
Sales -
Customer buying behaviour –
- Inflation hitting 40-year highs as energy costs soar with consumers being worries about the economy almost as twice as much as the next topic (health), and higher prices are lowering confidence.
- Physical dealer locations play an important role in the buying process. On average, buyers in the UK had 3.1 total dealership visits and 2.5 visits to different dealers for a used car.
- Test drives are an important component in the used car buying process with 74% in the UK doing this. Franchised and independent dealers are the most preferred by consumers. This is in contrast to online intermediaries or retailers, who almost half do not want to be involved in the process.
- 44% of buyers in France want the manufacturer to play an important role in the buying process, only 15% in the UK do.
- Over 50% of UK buyers see better value for money in used cars as being the number one reason for a used car purchase.
- Consumer appetite to buy online exists and is growing over time – 26% willing to buy a used car online in August 2019, to 33% in August 2021.
- Today, around 5% of used car sales are online by new entrants.
NFDA Member Arnold Clark is the leading used car retailer across the whole of Europe:
- 224 outlets
- 200,000 used retail sales
- 2.9 Billion euros revenue
If you would like more information relating to this document, such as links and sources, please feel free to contact the NFDA Policy & Research team at oliver.nurser@rmif.co.uk.
