The latest on new car prices
According to the latest data from our Retail Price Index the average price of a used car increased 2.8% last month to £17,815, making May the 38th consecutive month of year-on-year (YoY) retail price growth. Although it’s the largest YoY increase in six months, potential retail growth remains constrained by used electric vehicle (EV) prices, which fell 18.6% in May, as the huge surge of stock entering the market (up 201% YoY in May) continues to outpace very robust levels of consumer demand (up 44% YoY). Market dynamics of high demand and low supply in the used EV sector last year, which caused prices to rise, mean that current price drops largely represent a recalibration.
Despite marking the highest rate of YoY retail price contraction recorded by the Index, there are signs of used EV values beginning to stabilise, with the rate of decline only marginally greater than the -18.1% drop seen in April.
Strong retail price growth in the wider retail market is being stimulated by the opposite imbalance of supply and demand dynamics. Whilst consumer demand remains strong, as reflected in the 12% YoY (77.3 million) increase in cross platform visits to Auto Trader in May, levels of supply on the marketplace are down 6% YoY. This imbalance is not only keeping second-hand car prices stable, but also supporting a healthy and profitable used car market. Accordingly, Market Health was also up 12% YoY last month.
The speed at which cars are selling is another key indicator of market health. Last month, used cars took an average of 28 days to leave retailers’ forecourts, four days faster than in May 2022 (32).
Closing EV – ICE gap fuelling significant used EV demand.
Looking at the used EV pricing data at a more granular level reveals just how fragile the used electric vehicle market is. Although the current rate of used EV supply growth is slowing – at 201% YoY, May marked the lowest rate of growth since October 20223 – the market continues to see a huge influx of stock. There are currently circa 15,000 used EVs for sale each day on Auto Trader, 29% of which is now under £20,000, which is up significantly on the 7% recorded in August 2022. As the availability of more affordable electric cars has increased, so too has consumer demand, with the share of EV enquiries generated through our marketplace for the one-to-five-year age range almost doubling over the last 12 months, from 4% to 7.3%, the highest level ever recorded.
The drop in average EV prices has significantly closed the upfront price gap between many electric models and their ICE counterparts, and in some cases, made them cheaper. For example, a three-year-old electric Jaguar I-PACE is now £600 cheaper than a traditionally fuelled F-PACE. And with retailers slashing the prices of used Teslas more than any other brand in response to new car price reductions, the average price of a used 3-year-old Model 3 (£30,700) is now just £3,600 more expensive than a BMW 3 Series of the same age - in August the price gap was a whopping £22,000. As a result, the Model 3’s market share of electric enquiries through our marketplace have shot up from 8% to nearly one in five (18%) over the same period.
As supply and demand dynamics improve, used electric cars are starting to sell faster, with the average EV taking 42 days to sell in May, which is down from a peak of 47 days in January. However, the speed of sale lags far behind petrol and diesel cars, which both took an average of just 27 days to leave forecourts last month. The Tesla dynamics impacting price are also seeing used Teslas fly off the forecourt with an average of 22 days to sell, almost half of the overall used EV average.