In a surprising turn of events, the demand for used cars has remained robust despite a fall in retail prices, according to Auto Trader, a leading online marketplace for buying and selling vehicles. The company’s data reveals that the average price of a used car has decreased by 1% from October to mid-November, with the current average price standing at £17,492. However, this decline in prices is not indicative of a stagnant market. In fact, all segments of the used car market have experienced growth compared to the previous year. This article will explore the factors contributing to the resilience of the used car market and the shifting trends in consumer demand and behavior.
The Resilience of the Used Car Market
Despite the challenges posed by the COVID-19 pandemic, the used car market has proven to be remarkably resilient. Auto Trader’s data shows that consumer demand for used cars has increased across all segments and fuel types compared to the previous year. In November 2022, overall demand was up 6.9% from the previous year, while supply, as determined by stock levels on Auto Trader, increased by just 3.2%. This indicates that the demand for used cars is outpacing supply, creating a favorable market for sellers.
Auto Trader’s Market Health metric, which assesses the potential profitability of used cars based on real-time supply and demand dynamics, has also seen a positive trend. It is up by 3.6% compared to the previous year, indicating that the market remains strong despite the fall in prices. This suggests that sellers can still achieve favorable prices for their vehicles.
Shifting Trends in Consumer Demand
While the overall demand for used cars has increased, there have been notable shifts in consumer preferences and behavior. One significant trend is the rising interest in low-emission cars. Auto Trader reports a substantial increase in demand for plug-in hybrid and full/mild hybrids, with year-on-year growth rates of 37.6% and 51.1% respectively. This surge in demand can be attributed to improved affordability and availability of these eco-friendly vehicles.
In contrast, demand for petrol and diesel cars has experienced more conservative levels of growth, with year-on-year increases of 2.7% and 0.7% respectively. This indicates a gradual shift towards greener alternatives among car buyers.
Factors Influencing Price Fluctuations
The fluctuations in used car prices can be attributed to several factors. Auto Trader’s data reveals that cars older than five years experienced a price increase of 2.2% compared to the previous year, while those older than ten years saw a robust 8.4% increase. On the other hand, the average price of cars aged below five years decreased by 4.5% year on year. This decline can be attributed to the increased supply of younger vehicles in recent months and pressure from new car deals.
It’s important to note that despite the overall decline in prices, certain models have seen significant price increases. Auto Trader highlights the top ten used cars with the highest year-on-year price rises, including the Suzuki Jimny, VW Beetle, and Peugeot Partner Tepee. These models have seen price increases ranging from 6.7% to 13.6%. Conversely, there are also models that have experienced substantial price drops, such as the Porsche Taycan and Citroen e-C4.
The Speed of Sales
An interesting aspect of the used car market is the speed at which vehicles are selling. In November, used cars took an average of 31 days to sell, which is consistent with the past three years. This indicates a stable trend in the market’s ability to absorb inventory. Notably, electric cars have been selling the fastest, with an average time to sell of just 25 days. This highlights the growing demand for electric vehicles and the willingness of consumers to invest in this technology.
Recommendations for Sellers
Based on the data and insights provided by Auto Trader, Richard Walker, the director of data and insights, offers valuable advice to retailers in navigating the current market. He advises against making knee-jerk reactions based solely on trends in trade values, as the used car market continues to demonstrate resilience and strong consumer engagement. Instead, he suggests pricing vehicles according to market demand to ensure a quick sale and maximize profits.
By closely monitoring supply and demand dynamics, retailers can make informed pricing decisions while avoiding unnecessary profit loss. The key is to capitalize on the market’s robustness and maintain a proactive approach to buying and selling used cars.
Despite falling retail prices, the demand for used cars remains robust, with significant growth in various segments of the market. This resilience can be attributed to a combination of factors, including increased consumer interest in low-emission vehicles and the favorable supply-demand dynamics. While prices may fluctuate, the overall market health remains strong, providing opportunities for both buyers and sellers.
In light of these trends, sellers are encouraged to price vehicles according to market demand and avoid knee-jerk reactions. By aligning their strategies with consumer preferences and leveraging the market’s robustness, retailers can navigate the changing landscape of the used car market and capitalize on the opportunities it presents.
Remember, it’s important to stay up to date with the latest market trends and insights to make informed decisions and adapt to the evolving needs of consumers. The used car market is dynamic, and those who embrace change will be well-positioned for success.