Significant surge in retailers increasing forecourts prices as demand accelerates following reopenings
According to the latest results from the Auto Trader Retail Price Index, which is based on daily pricing analysis of circa 900,000 vehicles, the average price of a used car in April was £14,124; a year-on-year (YoY) and like-for-like increase of 7.1%. As well as the 13th consecutive month of price growth, it marks the second month the rate of growth has accelerated, increasing from the 7.0% and 6.6% recorded in March and February respectively.
This acceleration has been fuelled by the surging levels of demand in the market, which last month increased 36% on April 2019, boosted by the long-awaited reopening of physical showrooms on the 12th. What’s more, traffic to the Auto Trader marketplace recorded a similar uplift, reaching a total of 69.3 million cross platform visits, which is an increase of 36% on the same period in 2019. April also saw growth in the amount of time consumers spent on Auto Trader, averaging 16.5 million minutes every day last month, again up 30% on 2019.
This increased activity resulted in a 74% growth in leads[i] being sent to retailers. As well as highlighting strong underlying car buying demand, this growing volume of enquiries reflects the change in buyer behaviour to make contact before visiting a forecourt.
Acceleration in the number of retailers increasing sticker prices
Price growth has also been driven by an important change in retailer pricing strategies. Underlining their confidence in the market, as well as the influence of supply and demand dynamics, there’s been a significant acceleration in the number of retailers making positive price adjustments to their stock. Of the average of 2,316 retailers who adjusted their prices last month, more than one in five (22%) made an overall price increase across all stock on their forecourts. This is up significantly on the 16%[ii] who made increases in March and the 15% [iii] in February. This has accelerated even further into May, with now more than one in four (27%) of the retailers amending prices, adjusting upwards.
Commenting on the results, Auto Trader’s director of data and insight, Richard Walker, said: “The levels of demand in the market increased significantly last month, resulting in the already very strong price growth accelerating even further. Whilst there are some concerns over current trade prices, this exceptional growth should give retailers confidence to buy knowing the positive trading margins available. It’s more important than ever to adopt a ‘retail back’ approach to pricing, because trade valuations simply cannot keep pace with the speed of change and do not truly reflect the live market.
“Encouragingly, wider economic factors suggest that these high levels of car buying demand are set to continue for some time. If that’s the case, we’ll need to see supply improve substantially from today’s levels before that dents either the price growth we’re tracking, or the margin opportunities seen by retailers.”
Demand for ICE heats up and electric appetite surges
On a more granular level, the spike in consumer demand recorded in the wider market last month was felt across all fuel types, particularly amongst electric vehicles. Used volume[iv] EVs have seen a very steep trajectory over recent months, with levels increasing from an already significant 132% YoY in March 2021 (from 18% in February), to 242% in April, far outstripping the 84% growth in supply levels. As a result of this imbalance in supply and demand, prices increased 8.2% (£20,364).
It was a similar picture for premium EVs[v], with demand increasing from 136% YoY in March (from 48% in February) to 209% last month. However, these strong levels of growth were outdone by the very robust levels of supply of premium EVs in the market, which increased 211%, causing average prices to contract -4.0% YoY (£43,011) in April.
In contrast, the traditionally fuelled counterparts saw levels of supply fall last month, with the number of used diesel and petrol cars in the market dropping -24% and -12% YoY respectively. It marks the first time the levels of supply of petrol has contracted since October 2020. However, consumer demand remains very strong for both fuel types, increasing 62% and 60% respectively, continuing to counter the theory that values of petrol or diesel cars will decline given the focus on new electric cars. As a result, the average price of a used diesel grew by more than the average increase across all cars and was up 9.2% YoY (£14,804) last month, whilst petrol prices grew 5.8% (£12,627).
Sue Robinson, NFDA Chief Executive, added: “The repeated increase in average used car prices shows a healthy market which is set to continue to perform well fuelled by pent-up demand as dealerships have now reopened as well as a growing confidence in the economy. These figures are mirrored by retailers’ feedback which indicates strong customer footfall and large volumes of enquiries”.
[i] Email, part exchange enquiry, finance enquiry, texts and chats.
[ii] Of an average of 2,519 retailers who made a price adjustment in March 2021
[iii] Of an average of 2,454 retailers who made a price adjustment in February March 2021
[iv] 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
[v] Premium EV brands categorised as: Audi, BMW, Mercedes-Benz, Land Rover, Jaguar, Tesla, Volvo, MINI, DS AUTOMOBILES, Lexus, Abarth, Alfa Romeo