Are used car values still strong? Auto Trader says yes, although a few niche models are depreciating in a pre-pandemic way.
Here’s the word;
Contrary to recent speculation of an imminent crash in prices and faltering levels of demand, a quick look under the bonnet reveals that the used car market remains in robust health. In fact, according to the latest data from the Auto Trader Retail Price Index, which is based on daily pricing analysis of circa 900,000 vehicles (making it the largest and most accurate view of the market), average used car prices continue to grow year-on-year (YoY), increasing 15.6% in August on a like for like basis. It marks the 29th month of consecutive price growth.
Although the YoY rate of growth is softening from the all-time-high of 32.2% recorded in April 2022, it is to be expected; a result of the market overlapping last year’s exceptionally strong levels of growth (in August 21, prices were up a then record 17.2% YoY). By applying a longer-term view, it’s evident just how strong used car prices remain and how fast they have grown in just a few years: last month the average price of a used car was up 36.4% on August 2020, and a whopping 43.4% on August 2019.
Consumer demand remains above pre-pandemic levels
Levels of consumer demand is seeing a similar YoY softening. But any comparisons made with 2021 will again be heavily distorted due to last year’s exceptional ‘once in a life-time’ levels. According to the latest onsite data from Auto Trader, the volume of advert views on its marketplace dipped -11% YoY, but against the more ‘normal’ trading conditions of 2019, they’re up a healthy 16%. Any suggestion therefore of falling prices or faltering demand is simply a misinterpretation of the data.
A similar misunderstanding of the data saw some commentators attribute the recent dip in used car sales (-13% in Q2 vs 2019) to the apparent but false conclusion of falling demand.
However, Auto Trader data reveals that the decline in sales has, in fact, been driven by supply constraints, as sales remain healthy where stock is readily available. For example, sales of cars aged below five years-old fell -24% in Q2 against 2019, however, the levels of stock for that age cohort was down -19% over the same period.
Conversely, stock levels for cars aged over five years-old were up 14%, and as a result, helped fuel a healthy 15% increase in sales against 2019. And highlighting the continued levels of demand in the market, on Auto Trader, the volume of advert views for cars of this age cohort were up 27% last month when compared with August 2019.
Some cars are losing value and Auto Trader reckons the Jaguar XK series is down 12%, Land Rover’s Discovery 3 has lost 10% and the BMW 8 Series gas guzzling sports coupe has lost 7.4% in value, year-on-year.
Public transport does not work
Despite the current backdrop of economic uncertainty, Auto Trader remains confident that the current levels of demand in the market will be sustained, driven by a number of important factors, not least the huge backlog (circa 500,000) of people waiting for a driving test.
More broadly, demand will be fuelled by the fact cars are, for the vast majority of motorists, a fundamental need as opposed to a discretionary luxury. This was highlighted in the latest Auto Trader research, which found that more than three quarters (77%) of the 2,002 car buyers surveyed in July, needed a car to get around, which is up from 71% in pre-pandemic February 2020.
A winter of strikes across the public transport sector are also likely to fuel demand for cheaper used cars and motorcycles. Many jobs still require a daily commute to a warehouse, prvate company office, retail shop or public sector depot. These workers cannot rely on buses or trains and a car also offers more personal safety from the gangs of thugs and knifemen roaming the streets.
The demand for reliable, relatively low mileage petrol and diesel cars is strong and likely to remain so. As electricity is rationed and power cuts affect home charging, plus on-street chargers are disabled remotely, those who bought a pure EV are going to reap a cold harvest this winter.
Smaller used car dealers should stock up on portable petrol generators now. There’s going to be a boom around November.