RETAILERS MISSED OUT ON £25.5M IN POTENTIAL PROFIT IN MARCH AS STRONG DEMAND HELPS FUEL UNSEASONABLE PRICE GROWTH, AUTO TRADER REVEALS

• Retailers missed out on an average of £3,300 in potential profits across their stock, per forecourt, in March by under-pricing stock.
• The average price of a used car in March increased 2% YoY and 0.2% MoM.
• Auto Trader reports a record 82.5 million visits in March, up 20% YoY.

According to the latest data from Auto Trader, the first quarter of 2023 closed on a high, with strong growth recorded in demand, sales, and used car retail prices. In fact, Auto Trader’s Retail Price Index shows that used car price growth accelerated in March, following 10 months of softening, fuelled, in part, by exceptionally strong levels of consumer demand, as highlighted by the record 82.5 million visits to Auto Trader’s marketplace last month.

Despite the strength of the used car market however, retailers missed out on nearly £25.5 million in potential profit in March by pricing their stock below their true market value. Auto Trader’s data shows that nearly 7,700 of its circa 15,000 retailer partners advertised their cars below their current value[1], with each retailer leaving an average of £3,300[2] in potential profits on the table as a result.

Pricing trends in reverse as market goes from ‘strength-to-strength’

Based on circa 900,000 pricing observations across the automotive retail market, the Retail Price Index found the average retail value of a used car was £17,712 in March, which on a like-for-like basis is up 2% year-on-year (YoY). Whilst used car prices have grown YoY for 36 consecutive months, the rate of growth has gradually eased since April 2022, when it had reached its peak of 32.2% YoY. March marked a reversal of this trend, however, rising from the 1.3% YoY recorded in February.

Used car prices also grew on a month-on-month (MoM) basis. Although softening slightly on the 0.3% MoM recorded in February, prices rose 0.2% in March. It not only represents the third consecutive MoM increase, but also the largest March movement on record, sitting well ahead of pre-pandemic norms, where prices typically declined by -0.4% during this period.

The acceleration in price growth is the result of the ongoing challenges in used car supply (down -11% YoY in March), and the recent strengthening in consumer demand (up 12% YoY). This imbalance is not only keeping second-hand car prices stable, but also supporting a healthy and profitable used car market. Indeed, Auto Trader’s Market Health metric was up 26% YoY last month – the highest rate in over 12 months.

The growth in demand is reflected in the exceptionally strong consumer engagement recorded on Auto Trader since the start of the new year. In just three months, there have been nearly 238 million cross platform visits to its marketplace, which equates to 31 visits every second by car, van and bike buyers in the UK. The massive 82.5 million visits recorded in March (up a whopping 13.2 million on last year) marked the second record of the quarter, following the previous all-time high recorded just two months earlier, in January 2023 (80.4m).

Critically, the growth in demand has translated into used car sales, which according to Auto Trader’s sales-proxy data[3], grew circa 9% YoY in March. It means sales in the first quarter of 2023 were up around 7% on the same period last year, but down nearly 5% on pre-pandemic levels due to the ongoing shortfall in younger cars. Indeed, Auto Trader’s data shows supply levels of 1–3-year-old and 3–5-year-old cars, were down -22.3% YoY and -25.4% YoY respectively last month.

The speed in which cars are selling is another key indicator of market health. Last month, used cars took an average of 26 days to leave retailers’ forecourts, two days faster than March 2022, and three days faster than 2019 levels. The combination of these market dynamics and factors, point to pricing remaining strong in the months to come.

Auto Trader’s Director of Data and Insight, Richard Walker, said: “Given the stream of negative newspaper headlines, for many people the outlook for 2023 didn’t look promising. But against a backdrop of political and economic uncertainty, used car prices, and the market more broadly, has gone from strength-to-strength in Q1. It’s a very encouraging start to the year and these strong market indicators adds to our confident outlook for the months ahead.

“Whilst other parts of the economy are subdued, the car industry is once again proving its resilience, but many retailers are inadvertently leaving profit potential on the table. To ensure businesses are securing the strongest margins possible, it’s vital they follow the data.”

Sue Robinson, Chief Executive of the National Franchised Dealers Association (NFDA), commented: “As Q1 comes to a close, it’s a good opportunity to take stock of the current health of the market. It’s incredibly encouraging to see an acceleration in price growth and consumer engagement on Auto Trader. With the average retail value of used cars up 2% year-on-year, on a like-for-like basis, coupled with robust consumer appetite, dealers are confident that the strong levels of trading exhibited in the opening months of this year, will continue into Q2.”

Top 10 used car price growth (all fuel types) | March 2023 vs March 2022 like-for-like

Top 10 used car price contraction (all fuel types) | March 2023 vs March 2022 like-for-like

[1] Pricing 98% or less of Auto Trader’s market valuation of 100%.

2 Average missed profits across stock, per forecourt, based on -£25,448,953 total difference to 100% Retail Valuation in March, split across 7,693 retailers

3 Based on the volume of stock removed from Auto Trader in March.

[1] Based on Auto Trader market valuations

[2] Average missed profits across stock, per forecourt, based on -£25,448,953 total difference to 100% Retail Valuation in March, split across 7,693 retailers

[3] Based on the volume of stock removed from Auto Trader in March.