Confidence is key as used car market outlook remains stable

The latest data from our Retail Price Index, which is based on daily pricing analysis of circa 900,000 vehicles, revealed that the average price of a used car was £17,173 in July, which on a like-for-like basis, is a 19.5% increase on the same period last year.

Against the all-time high of 32.2%, recorded in April 2022, last month’s rate of growth appears relatively conservative. However, whilst some commentators have been predicting an imminent price crash for several months now, our data reveals used car prices remain stable. In fact, on a month-on-month (MoM) basis, average prices have increased (0.2%), which contrasts with typical seasonal trends (July 2019 recorded a -0.4% decline) and undermines any suggestion prices are about to drop.

The current softening in the rate of growth is due, in part, to the fact growth is now overlapping last year’s already very high levels - in July 21, prices were up at a then all-time high of 14.1% year-on-year (YoY). By applying a longer-term view, it’s clearer to see the full extent of the recent growth and just how strong prices remain; last month the average price of a used car was up over £3,300 [1] when compared with July 2020, and a whopping £4,100 [2] when compared with July 2019.

Further contributing factors include a slight YoY softening in consumer demand.  However, context is again key, and any comparisons made with 2021 will be heavily distorted due to last year’s exceptional ‘once in a life-time’ levels, which was 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, the volume of advert views on its marketplace dipped -5.7% YoY, but against the more ‘normal’ trading conditions of 2019, they’re up 12.4%. So, whilst some may point to an apparent but false conclusion of falling prices and faltering demand, Auto Trader’s data suggests a very different story. 

Outlook for used car market remains stable

Despite economic uncertainty around the rising cost of living, surging fuel prices, and the Bank of England’s expected hike in interest rates to curb rocketing inflation, Auto Trader research offers a more stable outlook for the used car market. Indeed, circa 80% [3] of consumers visiting the Auto Trader marketplace who were surveyed in July were at least as confident as they were last year in their ability to afford their next car – 43% said they were more confident, which is up on the 41% recorded in June, and the 38% in May. What’s more, in a separate survey of Auto Trader visitors [4], three quarters stated they were intending to buy a car within the next six months, which is consistent with the levels over the last year, whilst two in five (40%) are planning on making a purchase in the next two weeks.   

Sources

[1] Up from £13,888 in July 2020

[2] Up from £13,113

[3] Auto Trader internal data July 2022; 559 car buyers asked Do you feel more or less confident in being able to afford your next car than you did a year ago?

[4] Auto Trader internal data; 1,914 car buyers surveyed in July 2022