The latest on used car prices
According to our Retail Price Index, average used car retail prices have contracted on a year-on-year (YoY) basis for the first time since March 2020, largely due to the ongoing softening in the value of younger-aged vehicles. Based on circa 800,000 daily observations, the average price of a used car in September was £17,736, down -0.4% YoY like-for-like, marking the end of a remarkable 41 months of consecutive growth.
Rather than signalling an imminent crash in used car prices, however, the decline in the headline figure highlights the current nuance of the used car market and conceals strong growth recorded in many different segments. In fact, whilst the average price of ‘nearly new’ cars (those under 12 months old) fell -2.5% YoY in September and those aged 1-3 dropped -6.7%, their older counterparts (representing a far larger share of the market) recorded very robust levels of growth. Indeed, cars aged 10-15-years-old grew 9.8% YoY, and those over 15 years increased 6.1%, underlining the strong profit potential still available.
The primary cause of the current softening in prices among younger vehicles is due to the easing of supply constraints, with the growth in new car sales increasing the volume of second-hand stock entering the market. In September, the rate of supply growth for ‘nearly new’ cars was 42% YoY (albeit down circa 55% on pre-pandemic levels). With supply growth outpacing the otherwise very strong levels of demand growth (up 32.4%) for this age cohort, basic economics dictates a modest decline.
Compounding the issue is the significant increase in young used EVs entering the market, fuelled by the ongoing de-fleeting of the circa 750,000 EVs sold over the last three years. In September alone, supply of EVs under three years old on Auto Trader was up 43.7% on the same period last year, and with average value of EVs within this age group down -19.1% YoY last month, overall prices in the younger end of the market are being suppressed.
Used EV prices continue to stabilise.
Second-hand electric prices more broadly are continuing to show signs of stabilising. After 13 consecutive months of prices contracting on a MoM basis, prices were flat in September (£32,142). Although prices fell -22.1% YoY (across all age groups), it’s a slight slowing in the rate of contraction compared to August, which saw a -22.6% decline.
This growing stability is due to rocketing consumer demand for second-hand EVs (driven by improving affordability), which on Auto Trader was up 86.71% YoY last month, marking the first time since July 2022 it has been ahead of supply growth (up 56.8%). A further indicator of the solid levels of consumer demand in the market is the speed in which used cars are leaving retailers’ forecourts; our data shows EVs were the fastest selling fuel-type in September, taking just 26 days to sell.