The Auto Trader Retail Price Index has disclosed a second consecutive month of contraction in average used car retail prices in October, down by -1.7% year-on-year (YoY). Despite this headline figure, the report suggests a nuanced and resilient used car market with robust consumer demand and continued price growth in specific market segments.

The average price of a used car in October stood at £17,641, marking the largest YoY drop in prices in over 43 months. However, context is crucial, as this contraction rate mirrors that of October 2019 before unprecedented market forces disrupted pricing patterns, leading to a substantial increase in average prices. Comparing October 2023 prices to previous years reveals a significant rise, with values up £3,627 from the same period in 2020 and an impressive £4,308 from pre-pandemic 2019.

Auto Trader's proxy sold data suggests a 2% YoY increase in transactions in October, highlighting the market's resilience. The speed of sale remains robust, with vehicles selling in an average of 29 days, one day faster than October 2022. Although used car supply is on the rise, up 2.3% compared to October 2022, it still lags behind the 6.8% YoY growth in consumer demand. Auto Trader recorded 74.3 million visits in October, indicating a 9% YoY increase.

The headline average price contraction is attributed to a drop in prices among younger used cars, particularly those aged 1-3 years, which experienced a -7.6% YoY decrease. In contrast, cars aged 10-15 years saw a substantial 9.6% YoY increase, emphasizing the strong profit potential in specific segments.

Electric vehicle (EV) prices witnessed a significant YoY decline of -20.5% in October, although the month-on-month drop was a modest -0.3%. This decline is partly due to a surge in supply, with EVs under a year old on Auto Trader increasing by 48.1% YoY. However, strong consumer demand for used EVs, up by 75.9% YoY, is outpacing supply growth, contributing to a stabilization of prices.

Auto Trader's Director of Data and Insights, Richard Walker, urged dealers to be guided by consumer trends and the broader retail environment in their stocking and pricing decisions. Despite the headline contraction, the market presents opportunities, with 14% of used cars advertised on Auto Trader priced below their market value in October.

Sue Robinson, Chief Executive of the National Franchised Dealers Association (NFDA), added: "Dealers should be encouraged by Auto Trader's pricing and consumer insights. The stabilising of electric vehicle values is instilling confidence among prospective buyers. It will be interesting to see how the government will meet increased consumer demand in respect of EVs in the Autumn Budget, following this data. It is essential that the government increases investment into EV infrastructure to ensure that growing demands are met and to allow the sector to flourish."

Find the full report here: plc.autotrader.co.uk/news-views/retail-price-index/