USED CAR MARKET ENTERS 2024 IN ROBUST HEALTH, BUT AUTO TRADER URGES RETAILERS TO FOLLOW RETAIL MARKET ON PRICING
According to the latest data from Auto Trader, the health of the used car market has entered 2024 on firm footing, with consumer demand, speed of sale, and transactions in a robust position in December. However, Auto Trader’s Retail Price Index indicates retail values contracted -5.6% on a year-on-year and like-for-like basis last month to £17,064, suggesting recent trends in trade prices are now flowing through into the retail market.
Consumer demand on Auto Trader remained robust throughout December, increasing 11.7%[1] YoY (up from 8.6% in November), the strongest pace of growth since July 2023. Combined with a slight softening in the rate of supply to just 1% YoY growth, Auto Trader’s Market Health metric - which assesses market profitability based on supply and demand dynamics – increased from 6% in November to 10.6% in December, also the highest since July. This translated into sales too; Auto Trader’s proxy data point to circa 4% increase in used car transactions last month.
Buoyant consumer appetite was also reflected in the traffic to Auto Trader’s marketplace, which in December saw a total of over 67 million cross platform visits, which is a 10.2% YoY increase. Promisingly, the momentum has continued into the New Year with the number of visits up nearly 4%[2] during the first week of January, whilst the number of daily unique users has risen by nearly 1.5% YoY to circa 1.4 million. Furthermore, used cars continue to sell quickly; in December it took an average of just 36 days for a car to sell, which is the same as in 2022.
With promising signs of pressure beginning to ease on consumers, not least the much-improved GfK Consumer Confidence Barometer in December[3] as well as the 14% YoY increase in visits to its marketplace in 2023, Auto Trader predicts robust used car demand will continue in 2024 and result in a small market uplift. It forecasts transactions will increase to an estimated 7.24 million sales.
These signs of strong consumer demand further underline the need for retailers to follow the retail market. According to Auto Trader estimates, some 51,633 cars are currently being priced below their market value by 8,100 retailers. With robust consumer demand in the market, this repricing activity is potentially costing retailers £35.8 million in lost profits (nearly £4,500 per retailer).
Demand outpacing supply as market health remains robust.
Looking at the data at a more granular level highlights the pockets of profitability in the market, with Market Health improving for all but two age cohorts of used vehicles in December. 1–3-year-old cars saw a huge 35% rise due to the 16.1% increase in demand far outpacing the -14.3% fall in supply. The 3–5-year-old cohort was the second strongest performer with Market Health up 19.3%. Whilst strong overall, the only two cohorts to show a slight softening in Market Health were older 5-10 y-o categories (-0.4%) and 10-15 y-o vehicles (7.4%) as the supply of vehicles retuning to the market exceeded the otherwise positive demand.
By fuel type, all vehicles showed positive Market Health metrics, although electric vehicles were the outstanding performer in December as a massive 103.2% rise in demand far exceeded a 7.2% rise in supply, propelled by the recent fall in prices.
Pockets of strength in pricing
December marked the fourth consecutive month of YoY decline for retail prices. But as in previous months there was considerable nuance in the data as the trend of fleet destocking pushed down 1–3-year-old prices -10.1% year on year to £24,806. Used cars more than 10-year-old still showed positive price growth, with 10–15-year-old vehicles up 5.3% YoY to £6,532 and 15+ vehicles rising 2.5% to £5,516. Cars aged 3-5 years old slid -6.1% to £19,639.
Among fuel types, the average cost of a used EV was down 22.7% to £29,718 – continuing the trend of much larger falls than petrol (down 3.8% to £15,482 YoY) and diesel (falling 2.2% to £15,371).
“Our data clearly shows that the fundamentals of the used car market remain solid; consumer demand is robust, and cars are selling quickly, which combined with the slow return in supply, means retail prices continue to show more resilience than trade.
Walker continued: "Worryingly, it appears some pricing strategies are being guided by wholesale trends, placing pressure on retail values, and risking profits in the process. Rather than just a cause for concern, the retail and wholesale markets being out of sync also presents a profit opportunity for retailers who analyse the data on a car-by-car basis and price stock relative to retail valuations. More than ever, it’s crucial retailers adopt a forensic-like approach to their pricing strategies this year.”
[1] Based on volume of searches and advert views on Auto Trader
[2] Visits up 3.6% year-on-year during the first week of January 2024, number of daily unique users up 1.3%.
[3] Market research firm GfK recorded consumer confidence at -22 in December 2023, compared to -24 in November 2023 and -45 in January 2023.
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