Retail Price Index | June 2022
Used car price growth remains resilient despite rising inflation pressures
The like-for-like price of a used car has risen 28.4% in the past 12 months, marking its 26th consecutive month of year-on-year and like-for-like price growth, according to the latest data from the Auto Trader Retail Price Index (RPI).
The RPI is based on Auto Trader’s daily pricing analysis of around 900,000 vehicles - the most comprehensive market data in the United Kingdom, which will be used by the Office for National Statistics from next year to compile its official inflation estimates.
The like-for-like price of a used car in May was 28.4% higher than a year earlier. However, May’s growth is below April’s record 32.2% annual increase and reflects a continued slowing of the pace of price growth with the lowest annual comparison since last October. But comparisons with 2021 are distorted as Auto Trader’s price data is now overlapping exceptional “once in a lifetime” levels of pent-up demand last May following the end of the third lockdown, when prices were already rising at an annual rate of 8%.
While advert views on the marketplace are 12.6% down on the record levels of demand seen post Covid lockdowns in mid-2021, Auto Trader’s figures show audience and activity onsite remains strong compared to more “normal” pre-Covid levels, with the volume of advert views on its marketplace up 12.4% on May 2019.
Auto Trader’s analysis indicates a very gradual return to a “normal” market rather than a dramatic fall-off in car prices as the industry works through the supply chain pressures which have held back production, despite the rising pressure on consumers from inflation being at a 40-year high. Auto Trader expects these pressures to last into 2023, exacerbated by the war in Ukraine disrupting the supply of some parts.
Alongside the strong growth in advert views compared to pre-Covid levels, eight out of every 10 visitors to Auto Trader’s platform are at least as confident as last year, while three in four are looking to buy in the next six months – unchanged compared to 12 months ago. Car usage remains at 97% of pre-Covid levels, despite record fuel prices. Against the backdrop of higher used car prices, retailers are also cutting prices of used vehicles by lower amounts than before the pandemic, according to marketplace data – which suggests the bubble won’t burst anytime soon.
Demand for older cars declines
Auto Trader’s data shows prices for premium brands growing at a slower rate than volume brands. Demand for vehicles over five years old also turned negative for the first time since February 2021 as the high demand for older cars seen during Covid – as people sought to avoid public transport – now begins to soften.
It is important not to jump to rash conclusions about the health of the market, despite the softening in used car price growth during May. If we compare it with a boom in car-buying after the end of the third lockdown, it is unsurprising that the market might seem weaker. But judged by site visits to Auto Trader which are currently averaging 63 million a month, demand is still solid and looks likely to support pricing for some time to come.
“This is obviously a tough time for consumers and there are further economic hardships to come. But the supply chain issues triggered by Covid and its aftermath mean that there are around two million fewer cars in the market than would have typically been the case – and the problem has been worsened by the crisis in Ukraine. This is a market which is only going to gradually return to normal.”
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