Retail Price Index | December 2021
Used car market closes 2021 on a high, despite Omicron uncertainty
The latest Auto Trader Retail Price Index, which is based on daily pricing analysis of circa 900,000 vehicles, reveals an especially strong close to 2021 for the used car market. In December, used car prices surged by 30.5% on a year-on-year (YoY) and like-for-like basis, reaching an average of £17,816, marking the 21st consecutive month of growth.
The record price growth has been driven by unique market dynamics, in particular the very high levels of consumer demand in the market. This is reflected in the massive growth in traffic to the Auto Trader marketplace, which last year saw cross-platform visits increase 27% compared to 2019. What’s more, the time consumers spent on Auto Trader looking for their next car also saw a huge spike in 2021, with the average number of hours surging 20% when compared to pre-pandemic levels.
The very strong consumer demand in the market is further highlighted by the significant increase in the number of used and new car enquiries made to retailers through Auto Trader, which last year grew 8% and 71% respectively when compared to the prior year, both of which were off the back of already exceptionally high levels of enquiries in 2020. Heightened demand is also contributing to an increase in the speed in which cars are selling. Last month, the average used car sold 28% faster than in December 2020 (32 days vs. 41).
Car buying demand is being fuelled by a number of factors, not least the increased appetite for car ownership. This is highlighted by Auto Trader’s latest consumer research conducted in December, which revealed that for a third (33%) of respondents, owning a car is more important for them now than it was pre-pandemic.
One in four ‘nearly new’ cars priced above brand new equivalents
In addition to the massive demand in the market, price growth has also been affected by ongoing new and used car supply challenges. These unique market dynamics, which have seen significant production delays of new cars due to worldwide semi-conductor shortages in particular and then a subsequent slow-down in the used car market have meant that in some cases used cars have now achieved the very unusual status of being appreciating assets. In fact, in December the average asking price of a ‘nearly new’ vehicle (those aged less than 12 months old) increased by a colossal 45% when compared with two years prior in December 2019, reaching an average price of £34,429. This huge price growth means that almost a quarter of ‘nearly new’ cars are currently priced above their brand-new equivalents, whilst one in two are priced within 5% of the brand-new list price.
The reason for this continuing strength of used car pricing compared to brand new equivalents is twofold: more consumers are opting for nearly new cars over brand new vehicles which have long wait times due to supply constraints. The other is the fact that unlike in some countries, such as the US, the recommended retail price of a new vehicle in the UK is protected. This means that even though demand is significantly outstripping supply and we’ve seen a big reduction in the availability of consumer offers which would ordinarily be used to drive demand the prices of new vehicles have only seen modest ‘sticker price’ or MRRP increases.
2021 was a remarkable year for the automotive industry. Used vehicle pricing saw double-digit growth and used cars flew off the forecourts in record time. Despite ongoing restrictions, our sector has remained resilient in the face of significant challenges and is on track for strong continued price growth well into the second half of the new year. The two main factors fuelling this growth, supply constraints and strong consumer demand, both show no signs of easing anytime soon. Claims of an imminent ‘bubble burst’ are failing to take these key dynamics into account.
Looking at December’s price growth on a more granular basis, the current supply dynamics have resulted in exceptional YoY price growth for both petrol and diesel vehicles, with the former up 31.5% (£16,641) and the latter up 30.9% (£17,672). Demand for petrol increased by 2.3% YoY, whilst supply decreased by 4.9%. Demand for diesel decreased by -4.0%, but supply dropped by an even greater -12.9% in December.
Meanwhile, prices for both volume[1] and premium[2] electric vehicles (EVs) saw large month-on-month (MoM) increases. Last month, volume brand EVs increased by 30.4% YoY (£26,074), up from 27.8% growth in November, whilst premium brand EVs continued to catch up the pace, growing at a rate of 15% (£49,987), up from 10.1% the prior month. YoY demand saw downward MoM movements for both but remain exceptionally high with volume EV brands at 60.4% YoY (down from 73.5% YoY in November) and premium EV brands at 44% YoY (down from 67.8% YoY).
Top 10 price growth (all fuel types)
Top 10 price contractions (all fuel types) | December 2021 (YoY growth)
[1] Volume EV brands categorised as: Ford, Volkswagen, Vauxhall, Peugeot, Nissan, Citroen, Kia, Hyundai, MG, Renault, SEAT, SKODA, Honda, Toyota, Fiat, Suzuki, Mazda, Mitsubishi, Smart, Dacia, Jeep, Subaru
[2] Premium EV brands categorised as: Audi, BMW, Mercedes-Benz, Land Rover, Jaguar, Tesla, Volvo, MINI, DS AUTOMOBILES, Lexus, Abarth, Alfa Romeo
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