Auto Trader has reported positive trends in the UK used car market, with an improvement in consumer demand, transaction speed, and overall market health during February.

Despite these promising indicators, average retail prices continued their decline, marking the sixth consecutive month with a -8.3% year-on-year decrease. However, signs of stabilisation emerged, with February reporting the lowest month-on-month contraction (-0.6%) since October 2023.

Auto Trader recorded approximately 81.7 million cross-platform visits to its marketplace in February, reflecting a 9.4% increase compared to the same period last year. This heightened engagement aligns with robust consumer demand, as Auto Trader’s data reveals an 8% year-on-year increase in demand for February, surpassing January’s 6% uplift. Notably, around 80% of surveyed in-market car buyers expressed confidence in their ability to afford their next vehicle, with 31% feeling ‘much more’ confident.

The current pace of used car sales stands out, with an average selling time of just 27 days in February, marking the fastest speed of sale in 12 months and a significant improvement from January’s 40 days. This accelerated sales pace, particularly notable in specific segments like 3-5-year-old cars (26 days) and volume brands (25 days), contributed to a 3% year-on-year growth in transactions, according to Auto Trader’s retail sales tracker.

February also witnessed a 2.8% year-on-year increase in the supply of used cars entering the market, with notable growth in cars aged over 5 years (15.5%). However, the overall supply growth remains constrained by a 13.7% year-on-year decline in the 1-5-year-old stock, reflecting the lingering effects of the pandemic-related sales dip.

While supply growth trailed behind consumer demand, Auto Trader’s Market Health metric, assessing potential market profitability, rose by 5.1% year-on-year in February, surpassing the 4.2% recorded in January.

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However, nuanced dynamics influenced market segments differently. Strong demand for cars below 12 months (up 32% year-on-year) was matched by a 30% increase in supply, resulting in a modest 1.4% Market Health increase. In contrast, the 1-3-year age group experienced a 15.8% year-on-year demand increase against a supply drop of 15.3%, leading to a robust 37% Market Health increase.

Despite these positive market conditions, Auto Trader observed under-pricing of high-demand stock, likely influenced by wholesale value trends down approximately -13.4% year-on-year. Around 41,000 cars with a high Retail Rating score were advertised below their market average, indicating a potential cost of £27 million to retailers.

Richard Walker, Auto Trader’s Data & Insight Director, said: “February was another positive month for the used car market – demand was strong, stock sold quickly, and more cars were sold than last year. It’s disappointing therefore that retail prices were below where we would expect them to be given the otherwise very robust market health. Wholesale values are improving, and the number of vehicles being underpriced is falling, but still too many are being guided by trade rather than retail, and the result is an unnecessary erosion of margin.”

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