Public transport frustrations fuelling car ownership demand as retail price growth reaches 7 month high
The current average price of a used car is up 3.5% year-on-year and 0.3% month-on-month.
According to the latest data from Auto Trader’s Retail Price Index, the current average retail value for a used car is up 3.5% on last year’s levels, which were already 24% above 2021. It marks the largest rate of year-on-year (YoY) growth since November. On a month-on-month basis, prices are currently up 0.3%, which is ahead of seasonal norms (e.g. prices fell -0.9% over the same period in 2019). Older vehicles are recording the largest level of growth, with those aged a decade or more rocketing a massive 9% YoY.
With the rate of supply growth (+170% YoY) continuing to outpace the otherwise very strong levels of growth in consumer demand, electric vehicle retail prices are still contracting on a YoY basis, with current values (£31,537) down -18.4%. However, there are signs of used EV values stabilising, with the rate of decline slowing on the -18.6% recorded in May, and only marginally greater than the -18.1% drop seen in April. In contrast to their electric counterpart, the price of petrol (£16,203) and diesel (£16,417) fuelled used cars are currently up 5.8% and 5.4% respectively.
EVs aside, the acceleration in price growth is due to levels of consumer demand outpacing supply, which based on the volume of stock advertised on Auto Trader, is currently down -4.5% on June 2022. In contrast, levels of demand remain buoyant, and well above pre-pandemic levels. This is reflected in the level of consumer engagement on Auto Trader, which so far this month, has seen cross-platform visits increase 10% on this time last year.
Auto Trader’s data indicates this robust consumer demand is translating into transactions, with sales to date this month increasing 6% YoY. And with supply unable to keep up with demand, cars are flying off forecourts, taking an average of just 27 days to sell, which is one day faster than May, and six days faster than pre-pandemic 2019 (33).
Car ownership at record levels of importance
Despite current economic uncertainty, the latest consumer research from Auto Trader, points to consumer demand remaining buoyant. In fact, 85% of in market car buyers visiting Auto Trader that were surveyed in June, stated they’re at least as confident in being able to afford their next car as they were last year, whilst over three in four (77%) visitors are looking to purchase a car in the next six months, which remains consistent with previous levels.
What’s more, the same research found that the current squeeze on finances is having little impact on the importance of car ownership, with 96% of the 2,000 people surveyed saying that it was important for their household to own one, which is up from 95% last year. In fact, for nearly half (47%), car ownership has become even more important to them than it was 12 months ago – 50% said it hadn’t changed, and just 3% said car ownership had become less important. For younger buyers, aged 17-34, car ownership had become more important for over two thirds (68%).
The research also reveals some of the contributing factors to this growth, not least the recent disruption in public transport. Nearly half (46%) of those surveyed said ownership was important to them because they couldn’t rely on public transport, which is up from a third (34%) two years ago. And with no resolution in site to the ongoing industrial action, this frustration is only set to continue.
The impact of growing interest rates
Although this week’s rise in interest rates by the Bank of England are yet to flow through to car finance rates, Auto Trader’s data reveals that representative APRs on its marketplace have increased significantly over recent months. Average new car APR has risen from 6% in May 2022, to 8.4% last month (+2.4% YoY), whilst used car APR has increased from 9.6% to 11.4% over the same period (+1.8% YoY). Despite the increase however, it is having limited impact, with the volume of car buyers using Auto Trader’s car finance calculators increasing 12% YoY and a whopping 44% on pre-pandemic levels.
Although the economic backdrop is a concerning one, based on our metrics, the growing squeeze on household finances, which will be exacerbated by the latest rise in interest rates, is having a limited impact on car buying demand. Despite potential headwinds, our consumer research supports a cautious, but optimistic outlook for the months ahead. Cars are, for the vast majority of motorists, a fundamental need, as opposed to a discretionary luxury, so we believe the used car market will be largely shielded from wider economic disruptors.
Data & Insight DirectorCONNECT
 Representative onsite survey (all searching for a car) Do you feel more or less confident in being able to afford your next car than you did a year ago – up to 19th June.
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