‘Plan B’ measures have little impact on used car prices as growth rockets 28%
Despite the introduction of new measures to curb the rise in COVID-19 cases, the latest used car data from Auto Trader reveals the Government’s Plan B has had little impact on either consumer demand or used car price growth. In fact, last week (6th – 12th December) used car prices increased a massive 28% on a year-on-year (YoY) and like for like basis, which is up from 26.9% this time last month and marks the 84th consecutive week of price growth. Such is the huge acceleration, the average price of a used car on Auto Trader has increased circa £5,200 in the last seven months.
This acceleration is being fuelled by an imbalance of supply and demand in the market – the ongoing constraints in new and used car supply, coupled with exceptionally strong levels of consumer demand, which according to the latest data from Auto Trader, has been unaffected by the new restrictions. In fact, last week there were 11.6 million cross platform visits to its marketplace, which is a 20% increase on the same period two years ago. What’s more, there was also a 13% rise in the hours (1.7 million) consumers spent researching their next car.
Further evidence of the negligible impact Plan B has had on consumer demand, is the high volume of enquiries that are continuing to be sent to retailers through Auto Trader. Last week, the average number of used car ‘leads’ sent to retailers grew 46% when compared to the same period in 2019.
Another factor in the surge in prices is the ongoing drop in levels of supply, which were down -11% last week versus 2019. The shortage of micro-chips and other raw materials which is directly and dramatically impacting worldwide supply of new cars, is having a significant knock-on effect on the remarketing supply of used cars.
‘Flat’ weekly price movement in line with seasonal expectations
Looking at used car price changes on a more granular level, on a like-for-like basis average prices were flat (0.0%) against the previous week (29th November – 5th December). Whilst some commentators have suggested this is an indication the record price growth is finally starting to slow, it is in fact consistent with typical seasonal trends and does not reflect any significant change to the recent trajectory in year-on-year growth.
At this time of year, as we fast approach Christmas, it’s quite normal to see price growth slow on a week-on-week or even a month-on-month basis. What is far less typical however, is the very strong levels of consumer demand that we’re continuing to track in the market, which even with the introduction of the Government’s Plan B measures, shows no sign of weakening.
Data & Insight DirectorCONNECT
"In fact, fuelled by the recovering economy and a resilient labour market, we can expect very strong demand to continue for some time to come. Coupled with the ongoing new and used car supply constraints, these market dynamics will keep used car price growth on its current trajectory well into 2022. Any suggestion, therefore, that any recent easing is anything beyond a normal seasonal trend is simply not correct."
Retailers adopting an aggressive pricing strategy in line with market health
Such is the strength in the market, last week there was a -9% decrease in the number of retailers making daily price adjustments to their forecourts when compared to the same period in 2019. What’s more, there were circa 1,300 fewer daily price adjustments being made.
Highlighting the confidence in the market, over the last six months there has been a significant increase in the number of cars being priced above the market average from day one, which suggests retailers are being far more aggressive in their pricing strategies. In November, 38% of cars entering the market were priced above average, compared to just 24% a year earlier.
Largest used car price increases and contractions by model as of 6th – 12th December 2021
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