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June 10, 2022updated 23 Jun 2022 10:31am

Used car price growth remains resilient despite rising inflation

BEVs are selling as fast as petrol and diesel cars

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, according to Auto Trader.

The Auto Trader Retail Price Index (RPI) is based on the portal’s daily pricing analysis of around 900,000 vehicles – the most comprehensive market data in the UK, which will be used by the Office for National Statistics (ONS) from next year to compile its official inflation estimates.

The like-for-like price of a used car in May was 28.4% higher than a year earlier. 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. But comparisons with 2021 are distorted as Auto Trader’s price data is now overlapping exceptional “once in a lifetime” levels of pent-up demand last May following the end of the third lockdown, when prices were already rising at an annual rate of 8%.

While advert views on the marketplace are 12.6% down on the record levels of demand seen post-Covid lockdowns in mid-2021, Auto Trader’s figures show audience and activity onsite remain strong compared to more “normal” pre-Covid levels, with the volume of advert views on its marketplace up 12.4% on May 2019.

Auto Trader’s analysis indicates 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. Auto Trader expects these pressures to last into 2023, exacerbated by the war in Ukraine disrupting the supply of some parts.

Alongside the strong growth in advert views compared to pre-Covid levels, eight out of every 10 visitors to Auto Trader’s platform are at least as confident as last year, while three in four are looking to buy in the next six months – unchanged compared to 12 months ago. Car usage remains at 97% of pre-Covid levels, despite record fuel prices. Against the backdrop of higher used car prices, retailers are also cutting prices of used vehicles by lower amounts than before the pandemic, according to marketplace data – which suggests the bubble won’t burst anytime soon.

Demand for older used cars declines

Auto Trader’s data shows prices for premium brands growing at a slower rate than volume brands. Demand for vehicles over five years old also turned negative for the first time since February 2021 as the high demand for older cars seen during Covid – as people sought to avoid public transport – now begins to soften. 

Richard Walker

Richard Walker, Auto Trader’s director of data and insights, said: “It is important not to jump to rash conclusions about the health of the market, despite the softening in used car price growth during May. If we compare it with a boom in car buying after the end of the third lockdown, it is unsurprising that the market might seem weaker. But judged by site visits to Auto Trader which are currently averaging 63 million a month, demand is still solid and looks likely to support pricing for some time to come.

“This is obviously a tough time for consumers and there are further economic hardships to come. But the supply chain issues triggered by Covid and its aftermath mean that there are around two million fewer cars in the market than would have typically been the case – and the problem has been worsened by the crisis in Ukraine. This is a market which is only going to gradually return to normal.”

Used car sales: BEV demand goes through the roof 

Used Battery Electric Vehicles (BEVs) are selling as fast as petrol and diesel cars for the first time, according to the latest Indicta Market Watch report.

The demand for BEVs continues to gather strong momentum with used BEV sales in April 68% higher year on year.

Meanwhile, the UK remains the only country in Europe where used car prices are falling. From April to the beginning of May 2022 prices fell by a further 1.4% which are now 0.1 percentage points lower than the start of January.

Further evidence of how fast the used EV market acceptance is growing was the Kia Niro topping Indicta’s fastest-selling table in April with the Hyundai IONIQ in third place. 

Stock turn of the Niro and the IONIQ were 14x and 12x with just 26.6 days and 30.1 days of supply of the respective cars available in the market at the end of April.

However, used BEVs have been in such high demand in 2022 that stock availability in April fell by 36% year-on-year.

Total used car sales for April were 1.2% up on the previous month but 16.2% lower than in April 2021 with the semiconductor crisis continuing to create havoc with the usual used car seasonal sales patterns over the past two years.

“BEVs are in such high demand that stock levels have fallen dramatically over the past few months. We have noticed a step change in demand since the beginning of the year. Prices are consistently high with our regular alternative fuel auction for Arval continuing to create strong bids. However, overall average prices have settled down and are back to the levels they started the year at,” said Jon Mitchell, Indicta’s UK’s group sales director.

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