USED CAR PRICES RECORD FIRST ANNUAL GROWTH SINCE JULY 2019 AS RETAILERS URGED TO ‘HOLD FIRM’

By Richard Walker, Director of Data & Insight, Auto Trader.

Used price adjustments remain “on hold”

According to the latest data from our monthly Retail Price Index, which is based on pricing analysis of circa 900,000 vehicles every month, the average price of a used car in April reached £13,864. It marks the first year-on-year (YoY) growth on a like-for-like basis (albeit at 0.1%) since July 2019, which will come as welcome news for retailers concerned that valuation providers who rely on editorial opinion will adjust their valuations down sharply.

Since the beginning of the lockdown on the 23rd March, Auto Trader’s data scientists have observed a market that is largely on hold. To understand the scale of activity in the marketplace, they track the number of retailers making price changes, the number of stock items being repriced, and the value of that price adjustment.

Fewer retailers are changing prices

In normal trading conditions, approximately 2,500 – 3,000 retailers adjust the price of their stock every day. Last week[1] this figure had fallen to approximately 1,075, a year-on-year decline of 63% and just 232 more than the previous week. Typically, 21% - 25% of retailers change prices on a daily basis, but last week, just 9% did, indicating the majority of retailers are yet to begin repricing stock.

Fewer vehicles are being repriced

Last week, an average of 6,000 vehicles were being repriced daily, which is 68% lower than the same period last year (circa 17,500 – 24,000). 56% of stock being repriced is by independent retailers.

Average price reductions are lower

In terms of the amount of readjustment, prior to the lockdown, of those retailers changing their prices, the average amount was £250 - £550. Last week the average price change was £277. The average reduction for independent retailers was £210, and for franchise retailers, it was £358. It highlights that whilst the movement in prices are coming back to pre-COVID-19 levels, there remains a small number of retailers adjusting a very limited volume of vehicles.

It comes at a time when the number of people searching for a new or used car on Auto Trader has returned to pre-COVID-19 levels, with over a million visiting the marketplace every day. 

Hold firm on price and use data, not editorial opinion, to inform decisions

We’re very mindful of our responsibilities to customers and to the wider market, and so we’ve been closely monitoring the pricing of hundreds of thousands of vehicles to ensure we’re providing the most up to date and accurate evidence based insights. As we saw during the 2008/09 financial crisis, large price adjustments on a mass scale will have a major detrimental impact on the financial health of the industry. We need to avoid a repeat of this scenario and so it’s reassuring to see that retailers are not cutting prices. With consumer demand returning to the industry, we see absolutely no reason for them to do so.

Any negative movement based on speculation or editorial opinion is likely to result in a self-fulfilling prophecy of sharply falling prices. We strongly believe retailers should hold firm on prices until the evidence suggests that they’re moving, which is more likely to result in any adjustment being a measured and gradual adjustment.

Price fluctuations by fuel type

Last month, a paused market was evident in the performance of internal combustion engine (ICE) vehicles. The average sticker price of a second-hand petrol vehicle in April was £12,623, which on a like-for-like basis was a 1.7% YoY increase and the highest rate of growth since May 2019. And whilst diesel prices continued to contract, at -0.7% (£14,724) it marked the lowest rate of decline since June last year.

Alternatively fuelled vehicles (AFV) performed less positively, recording a -2% decline in average price (£22,132), the highest rate of contraction since July 2016. Similarly, the average price of a pure electric vehicle (EV) has fallen consecutively every month this year. In April, the average asking price of an EV was £25,657, -3.2% down YoY.   

[1] 9th May - 16th May