Inflation in the used car market is contiuing apace and for insurers that means the value of some written-off cars is also likely to increase. The latest info from Auto Trader suggests that many used cars are rapidly increasing in value, as supply remains patchy on some popular models. We could enter a situation soon where some older cars are worth a great deal in terms of spare parts, depending on the shortage of particular parts for repairable models.
It’s hard to say how this rationing of new cars, system control chips and spare parts by globalist inclined governments will pan out in the end, but for insurers and repair shops, the balancing act is going to be tricky. Here’s the latest from Auto Trader;
Based on the used vehicles currently advertised on Auto Trader, the average price of a used car increased 18.6% year-on-year (YoY) on a like-for-like basis last week (as of w/c 6th September 2021). It marks a 1.2% growth on the prior week and a three-fold increase on the 5.7% YoY recorded during the week of 12th April when physical forecourts reopened.
The record price growth is continuing to be fuelled, in part, by the dramatic increase in consumer demand, which as highlighted on Auto Trader’s Market Insight tool was up 22.5% (based on searches and advert views on Auto Trader) last week, when compared to the same period in 2019. This growth is reflected in the more than 15.5 million cross platform visits to Auto Trader last week, which marks a massive 33% increase on 2019. There was also a 21% rise in the hours (2.4 million) consumers spent researching their next car on its marketplace.
Another testament to the underlying levels of demand in the market is the faster speed at which retailers are selling cars. Last week, it took an average of 24 days for stock to leave forecourts, which is an 11% acceleration on the August average (27).
Another factor in the surge in prices, is the ongoing drop in levels of supply, which were down -13.3% last week versus 2019. The shortage of micro-chips and other raw materials which is directly and dramatically impacting worldwide supply of new cars is having significant knock-on effects on the remarketing supply of used cars.
A DEMO CAR COULD BE WORTH MORE THAN THE LIST PRICE – SERIOUSLY
Record growth in nearly new car prices exceeding brand-new equivalents
Such is the huge acceleration in used car prices, over 11% of the nearly new cars available in the market, those aged up to 12 months, are currently more expensive than their brand-new equivalents. This unheard-of situation has accelerated from around 4% at the start of the year, and 6% in April. However, for a handful of brands, including Mercedes-Benz (29%), Peugeot (24%), Lexus (22%), Dacia (21%) and Citroen (20%), over 20% of their respective nearly new stock is currently priced above new, whilst Land Rover and Subaru have 30%, highlighting both continuing strong demand for these products as well as the tightness of their new car supply situation.
Retailers adjusting prices up in response to record demand
Reflecting the current strength of the market, Auto Trader continues to see fewer retailers adjusting prices on fewer vehicles. More significant however, is the fact retailers are currently adjusting prices up, rather than down in response to the record demand. In fact, of the 2,225 retailers who made daily price adjustments last week (329 fewer than in the same period in 2019), the average price adjustment was an increase of £39. This time two years ago, retailers were making an average reduction of -£334. On average, franchise retailers increased prices across their forecourts by £81 last week, whilst independent retailers increased by an average of £15.