According to the latest pricing data from Auto Trader, based on the circa 480,000 vehicles currently advertised on its marketplace, the rate of growth in used car prices is beginning to stabilise. Last week (9th – 15th November), the average retail price increased 8.3% year-on-year (YoY) on a like-for-like basis, which is a marginal fall from a peak of 8.5%, recorded a week earlier. However, the level of growth remains exceptionally strong, and last week marks the 28th week of consecutive price increases for used cars on Auto Trader.
The strong rate of growth, albeit easing slightly on the previous week, is being driven largely by the imbalance of supply and demand in the market. To understand how these dynamics affect price movements, Auto Trader monitors both demand and supply to give a ‘market health’ calculation, which is available to all of its retailer partners for free via its Market Insight tool.
Despite thousands of forecourts across England having to close, and the tighter restrictions being felt across the UK, demand increased 21.1% YoY last week, whilst supply was down -9.1% YoY, leading to a 33.2% increase in market health. The very high level of demand in the market is further highlighted by the 12.9 million visits to the Auto Trader marketplace last week, which represents a 17.1% increase on the same period last year.
Looking at the data on a more granular level, the average price of used diesel and petrol cars on Auto Trader followed a similar trend to the wider market, with their respective rates of price growth beginning to show signs of easing. Last week, the average price of a used diesel increased 9.4%, dropping slightly from the 9.6% peak recorded the prior week. Whilst demand for the fuel type dropped -2.3%, the levels of supply fell more sharply at -7.5%.
In contrast, whilst the levels of demand for used petrol grew 4.9% YoY, it was outperformed by the levels of supply in the market, which increased 5.9%. However, the imbalance has had minimal impact on price growth, with the average price of a used petrol growing 8.4% last week, dropping slightly from the 8.7% recorded the prior week.
Last week, like-for-like prices continued to increase across all body types, with hatchbacks and estates recording the highest rate of growth, up 10.8% and 9.3% YoY respectively. However, SUVs remain the most in demand, increasing 10.1%, helping to fuel a 6.8% price growth. MPVs are recording the lowest rate of demand in the market, dropping -17.3% YoY, however prices remain stable, increasing 8.0% YoY.
Looking at the average weekly prices within age brackets, those used cars aged 10-15 years continue to be affected by low levels of supply, which last week was down -6.0% YoY, resulting in a 14.4% increase in prices, the highest rate recorded so far this month.
Premium versus volume
In October both premium and volume brands recorded strong price growth as a result of demand outstripping supply in the market. The latest snapshot of cars available on Auto Trader reveals this performance has continued into November, with the average price of used premium and volume cars increasing 7.9% and 10.4% YoY respectively. However, similar to wider prices, both categories saw a marginal easing on previous weeks, with premium prices slowing from a peak of 8.1% the prior week, and volume down from 10.8% the prior week, and a peak of 11.4% recorded during the week of 5th October.
Commenting, Auto Trader’s director of data and insight, Richard Walker, said: “As we’d expect from this time of year, there has been a gradual slowing of used car price growth on our marketplace over the last few weeks, but it’s important to remember this level of growth remains exceptionally high, and way above pre-COVID levels. The level of demand in the market is the biggest driver of price, and despite the national lockdown in England, we’re continuing to record a 17% YoY increase in visits, which underlines what little impact the tighter restrictions are having on consumer appetites.
“Our research shows that over 50% of car buyers are happy to buy through click & collect and home delivery services. So, whilst forecourts may be closed for many, with such high demand and strong profit margins available, retailers should have confidence in the data and make the most of this opportunity.”
Retailer pricing behaviour
Looking at how the restriction have impacted retailer pricing behaviour, the number of retailers making price changes and the value of their adjustments remain either lower than normal conditions, or at the lower end of typical pricing behaviour.
Last week there was an average of 2,204 retailers making daily price adjustments, which remains below the pre-lockdown average of 2,500 – 3,000. In total, 13,468 vehicles were repriced during the week, which is considerably lower than normal, which typically fluctuates between 17,500 and 24,000 vehicles.
In terms of the actual price reductions being made, pre-COVID-19 retailers typically lower sticker prices between £250-£550 per day. Last week the average price reduction was £325 which remains at the lower end, but an average of £43 more than the prior week.