Retail Price Index | September 2023
Used car prices contract for the first time in over 3 years, but nuanced market remains robust with buoyant demand
Wednesday 4th October 2023, London – According to the Auto Trader Retail Price Index, average used car retail prices have contracted on a year-on-year (YoY) basis for the first time since March 2020, largely due to the ongoing softening in the value of younger aged vehicles. Based on circa 800,000 daily observations, the average price of a used car in September was £17,736, down -0.4% YoY like-for-like, marking the end of a remarkable 41 months of consecutive growth.
Rather than signalling an imminent crash in used car prices, however, the decline in the headline figure highlights the current nuance of the used car market and conceals strong growth recorded in many different segments. In fact, whilst the average price of ‘nearly new’ cars (those under 12 months old) fell -2.5% YoY in September and those aged 1-3 dropped -6.7%, their older counterparts (representing a far larger share of the market) recorded very robust levels of growth. Indeed, cars aged 10-15-years-old grew 9.8% YoY, and those over 15 years increased 6.1%, underlining the strong profit potential still available.
The primary cause of the current softening in prices among younger vehicles is due to the easing of supply constraints, with the growth in new car sales increasing the volume of second-hand stock entering the market. In September, the rate of supply growth for ‘nearly new’ cars was 42% YoY (albeit down circa 55% on pre-pandemic levels). With supply growth outpacing the otherwise very strong levels of demand growth (up 32.4%) for this age cohort, basic economics dictates a modest decline.
Compounding the issue is the significant increase in young used electric vehicles (EV) entering the market, fuelled by the ongoing de-fleeting of the circa 750,000 EVs sold over the last three years. In September alone, supply of EVs under three years old on Auto Trader was up 43.7% on the same period last year, and with average value of EVs within this age group down -19.1% YoY last month, overall prices in the younger end of the market are being suppressed.
Used EV prices continue to stabilise.
Second-hand electric prices more broadly are continuing to show signs of stabilising. After 13 consecutive months of prices contracting on a MoM basis, prices were flat in September (£32,142). Although prices fell -22.1% YoY (across all age groups), it’s a slight slowing in the rate of contraction compared to August, which saw a -22.6% decline.
This growing stability is due to rocketing consumer demand for second-hand EVs (driven by improving affordability), which on Auto Trader was up 86.7[1]% YoY last month, marking the first time since July 2022 it has been ahead of supply growth (up 56.8%). A further indicator of the solid levels of consumer demand in the market is the speed in which used cars are leaving retailers’ forecourts; Auto Trader’s data shows EVs were the fastest selling fuel-type in September, taking just 26 days to sell.
This readjustment of levels of supply and demand is not only helping to stabilise prices but also supporting greater profit opportunities within this rapidly growing segment of the market. Accordingly, Auto Trader’s Market Health[2] metric for second-hand EVs is up 19.1% YoY this month, marking the first positive uptick in 14 months, and well ahead of the -21.5% recorded in August.
Auto Trader’s Director of Data and Insight, Richard Walker, said:
As prices stabilise and demand continues to accelerate, used electric vehicles are becoming a particular bright spot, and we’d urge retailers not to be distracted by the Prime Minister’s unexpected U-turn. The ongoing de-fleeting of the hundreds of thousands of EVs sold over the last few years, as well as confirmation of the ZEV mandate means the volume of used electric cars entering the used market is only set to increase. Ignore Westminster’s smoke-and-mirrors; EVs are here to stay and by following the data provide good profit potential.
Robust underlying market health
The decline in the headline figure follows months of a gradual easing, and with average prices typically falling between -0.5% and -1.5% between August and September, it’s largely in line with seasonal trends. What’s more, the market is overlapping three years of exceptionally high levels of growth; in September 2022 and 2021, prices increased 11.2% YoY and 21.4% respectively. Comparing today’s retail prices against earlier levels highlights just how strong used car prices remain; last month the average price of a used car was up 10.1% versus September 2021, and 34.2% on the same period in 2020.
Importantly, the market remains in robust health with levels of supply continuing to be outpaced by healthy levels of consumer demand[3], fuelled by a combination of macro factors, including public transport frustrations, and increasing new drivers entering the market as practical driving tests return to normal levels. This is helping to maintain a buoyant and profitable used car market; according to Auto Trader’s proxy sold data, used car sales were up circa 9% last month versus September 2022.
Walker concluded: “The recovery in new car sales has brought a steady increase in supply to the used car market, and with it triggered the first overall price contraction in second-hand prices in over three years. As is always the case with such a volatile used car market, context is key, and it’s critical not to be misled by the headlines. For the vast majority of the market, we’re still seeing robust levels of price growth being stimulated by a combination of strong demand and constrained supply and so whilst the overall figures may continue to soften over the coming months, the market remains profitable.”
Top 10 used car price growth (all fuel types) | September 2023 vs September 2023 like-for-like
Top 10 used car price contraction (all fuel types) | September 2023 vs September 2023 like-for-like
-ENDS-
About the Retail Price Index
The Auto Trader Retail Price Index (RPI) is published monthly and provides an overview of the latest price and search data from our marketplace. Our team of data scientists monitors circa 800,000 vehicles each day, including 116,000 vehicle updates and an average of 39,000 vehicles added or removed from Auto Trader. Coupled with data from circa 450,000 trade car listings every day, as well as additional retailer forecourts and website data (OEM, fleet and leasing disposal prices and pricing data from over 3,000 car dealership websites and data from major auction houses across the UK), ensuring the Index is an accurate reflection of the live retail market.
About Auto Trader
Auto Trader Group plc is the UK’s largest automotive marketplace. It listed on the London Stock Exchange in March 2015 and is a member of the FTSE 100 Index.
Auto Trader’s purpose is Driving Change Together. Responsibly. Auto Trader is committed to creating a diverse and inclusive culture, it aims to build stronger partnerships with its customers and use its voice and influence to drive more environmentally friendly vehicle choices.
With the largest number of car buyers and the largest choice of trusted stock, Auto Trader’s marketplace sits at the heart of the UK car buying process. That marketplace is built on an industry-leading technology and data platform, which is increasingly used across the automotive industry. Auto Trader is continuing to bring more of the car buying journey online, creating an improved buying experience, whilst enabling all its retailer partners to sell vehicles online.
Auto Trader publishes a monthly used car Retail Price Index which is based on pricing analysis of circa 800,000 unique vehicles. This data is used by the Bank of England to feed the broader UK economic indicators.
For more information, please visit: www.plc.autotrader.co.uk
For all media enquiries, please contact:
Andrew Nankervis | Andrew.Nankervis@autotrader.co.uk 07720 896760
[1] Based on levels of consumer engagement and stock levels on Auto Trader
[2] The Market Health metric shows the ratio of supply vs demand compared to the previous year.
[3] Consumer demand growth on Auto Trader was 7.7% and supply 1.2% in September 2023
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