The latest data from the Auto Trader Retail Price Index (RPI), based on a daily pricing analysis of circa 900,000 vehicles, revealed that the average price of a used car increased 23.7% on a year-on-year (YoY) and like-for-like basis in June.
Although it’s the 27th month of consecutive YoY price growth, it marks a further softening in the growth rate, easing from the 28.4% YoY increase recorded in May, and the all-time high of 32.2% in April. However, it’s important not to misinterpret this easing as a market in decline or a tumble in used car prices.
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Indeed, used car prices remain exceptionally strong, which is highlighted by applying a longer-term view on growth levels: average used car prices have increased £3,300 over the last two years, and a massive £4,500 in the previous three. And underlining the current stability in prices, on a month-on-month (MoM) basis, they were flat, which contrasts with typical seasonality given that May – June normally sees negative price movements (e.g. June 2019 declined 0.9% MoM).
The current apparent slowdown in YoY rates of price growth is the result of several factors, not least the fact that growth is now overlapping last year’s already very strong levels – on June 21, prices were up a then-record 11.1% YoY. Further contributing factors include a slight YoY softening in consumer demand.
However, context is key and any comparisons made with 2021 will be heavily distorted due to last year’s exceptional ‘once in a lifetime’ levels, which were fuelled by massive pent-up demand post-lock-down, and the huge surge in competition for used cars due to new car shortages. Therefore, it would be more accurate to compare the current market with pre-pandemic levels. According to the latest onsite data from Auto Trader, demand remains robust – whilst the volume of advert views on its marketplace has dipped a conservative 8% YoY, against the more ‘normal’ trading conditions of 2019, they’re up over 10%.
What’s more, the volume of used car enquiries being sent to retailers is up 67% in June 2019. As well as highlighting robust underlying car-buying demand, this growth also reflects the change in buyer behaviour to make contact before visiting a forecourt.
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By GlobalDataUsed car stability
Although increasing inflation and the rising cost of living could yet prove to be a headwind, the latest Auto Trader analysis and consumer research point to ongoing stability in the used car market. Whilst general consumer confidence is in decline, the current economic picture is quite different to previous periods of uncertainty, with current GDP growth, unemployment levels and interest rates all in a more stable position. What’s more, according to the Bank of England, household savings are still more than the pre-Covid projection, and broader retail sales remain robust. Critically, car usage hasn’t declined either, with road traffic remaining close to pre-Covid levels, whilst Auto Trader research indicates that a third (32%) of consumers believe car ownership is more important today than it was pre-COVID.
And with almost four million new (circa 1.9 m) and used car (circa 2.1 m) transactions ‘lost’ since 2020, combined with very large and lengthy brand-new order books, demand levels should remain. Auto Trader research supports this outlook, with confidence amongst ‘in market’ consumers remaining strong – three quarters (75%) of those surveyed in June stated they intend to make a car purchase in the next six months, which is consistent with levels over the last year. And in separate research, at least 80% of consumers visiting the Auto Trader marketplace are at least as confident as they were last year in their ability to afford their next car – 41% said they were more confident, which is up on the 38% recorded in May.
Richard Walker, Auto Trader’s director of data and insights, said: “Although the huge growth in used car prices we’ve been tracking over the last few years may continue to soften over the coming months, there’s certainly no indication in current data that prices are set to tumble. That’s because the same market dynamics that helped fuel the record acceleration in growth are still at play, albeit to a far less dramatic extent. Despite the clear economic headwinds, we remain confident of continued consumer demand in the market, which coupled with ongoing supply challenges in both the new and used car market, prices will remain strong for the foreseeable future.”
Sue Robinson, chief executive of the NFDA, said: “Demand for used cars from consumers remains solid. The supply of desirable good quality vehicles is still in short supply, which continues to keep vehicle values buoyant.”
‘Used car shortages will keep prices high for years’
