The latest on used car prices

The latest data from our  Retail Price Index (RPI), which is based on 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 rate of growth, 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.

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[1] over the last two years, and a massive £4,500[2] in the last 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 a number of factors, not least the fact that growth is now overlapping last year’s already very strong levels – in 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 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 our latest onsite data, 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 a huge 67% on 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.

Analysis points to used car stability

Although increasing inflation and the rising cost of living could yet prove to be a headwind, our latest 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 in excess of 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 our research[3] 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[4] 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[5], at least 80% of consumers visiting our 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.  

Sources

[1] Up from £13,949 in June 2020

[2] Up from £12,798 in June 2019

[3] Onsite survey, June 2022

[4] Auto Trader internal data; 1,936 car buyers surveyed in June 2022

[5] Auto Trader internal data; 645 car buyers asked Do you feel more or less confident in being able to afford your next car than you did a year ago?