The latest on used car prices

According to the Auto Trader Retail Price Index, which is based on circa 800,000 daily pricing observations, the average price of a used car was £17,732 in August, marking a 1.1% increase on a year-on-year (YoY) and like-for-like basis. The Index reveals the current volatility and nuance of the used car market, with recent headlines masking the underlying health of the used car market, and the pockets of demand and profit opportunities available. 

 Although the headline increase is softening on the previous record rates observed over the last 41 consecutive months, it is to be expected as the market continues to overlap three years of abnormally strong levels of growth; prices in August 2022 and 2021 were up 15.6% YoY and 17.2% respectively. By applying a longer-term view, it’s evident just how strong used car prices remain and how fast they have grown in a short period; last month the average price of a used car was up 36.9% on August 2020, and a whopping 43.3% on the same period in 2019. 

Prices have also softened month-on-month (MoM), falling -0.8% between July and August. Although slightly larger than normal, contraction in August is consistent with typical seasonal patterns (e.g. August 2019 recorded a -0.4% MoM decline).  

Younger cars supressing headline growth. 

Looking at the data on a more granular level highlights the current nuance of the market, as well as the factors contributing to the gradual slowing in headline YoY and MoM prices. Indeed, a quick look beneath the bonnet reveals the overall figures are currently being held back by younger age cohorts, with the average price of used cars aged up to three-years-old (£29,699) contracting -3.5% YoY and -0.9% MoM in August.  

Rather than faltering demand, however, the primary cause of price softening among younger vehicles is due to the recent easing of supply constraints in the market as new car sales have started to rise in both retail and fleet channels freeing up more supply of recent used vehicles. In fact, levels of consumer demand for used cars aged less than three years old rose 15.1% YoY last month, whilst supply was up an equally robust 14.4%, marking the second-highest rate recorded for this age group. Supply of ‘nearly new’ cars (those aged below 12 months) was up 51% over the same period, however, the volume of cars within this segment remains circa 50% below pre-pandemic levels.  

Prices of these younger cohorts are being further compounded by the current surge in second-hand electric vehicles (EV) entering the market, with the volume of EVs aged up to three-years-old advertised on Auto Trader increasing 97.4% YoY last month. Supply continued to outpace demand for EVs through August, leading to the average price of a used EV (£31,618) falling -22.6% YoY. However, the first week of September saw demand for used EVs outpace supply on our marketplace for the first time since July of last year. Demand is currently up by 87.4% with supply trailing at 77.7%. A continuation of this trend may further ease price pressure on used EVs.

Whilst younger vehicles have seen prices contract, other age brackets have seen prices rise far above the average for the market with the average price of petrol and diesel cars aged over three-years-old, which represents a far greater proportion of the market, increased 4.9% YoY last month.  

No imminent crash in sight as underlying demand continues to outpace supply.  

Although far from the same level seen in younger cars, supply is slowly improving across most age cohorts, with overall levels on our marketplace increasing 1.2% YoY, marking the first positive total market growth of supply since November 2022. However, supply volumes remain constrained by the circa three million fewer new cars that weren’t built during the last three COVID and semi-conductor-affected years, and importantly for future retail values, continue to be outpaced by robust levels of consumer appetite for used cars. In fact, demand was up 8.7% YoY last month across the market. 

A further indicator of the solid levels of consumer demand in the market is the speed in which used cars are leaving retailers’ forecourts. The latest data shows that used cars took an average of just 29 days to sell in August: two days faster than in July, and a day faster than August last year. Electric vehicles are selling even faster than the market average, taking just 28 days, two days fast than in July, and a day faster than their petrol-powered counterparts.