The latest on used car prices
The used car market saw a confident start to the new year, with both transactions and consumer demand recording growth in January, as highlighted by the record 85.5 million visits to our marketplace. However, whilst retail prices are showing signs of stabilising, our Retail Price Index reveals a drop of -7.5% year-on-year (YoY) and like-for-like in January as average prices continue to be pulled down by under-pricing of exceptionally high-demand stock, fuelled by recent trends in wholesale values.
Levels of consumer demand on Auto Trader remained buoyant in January, increasing 6.1% YoY, and well ahead of supply, which recorded a growth of just 1.2%. As a result, Market Health rose to a healthy 4.8% on January 2023.
Robust consumer appetite was also evident in the record traffic to our marketplace, which last month saw a total of over 85.5 million cross platform visits; a huge 27.5% increase on December, and 6.4% on the 80.4 million recorded in January 2023 (a then record). Crucially, this demand was translated into transactions, with early indications from our retail sales data suggesting a 1.6% increase in used car sales compared to last year.
Despite such strong market fundamentals, however, a proportion of high-demand stock is still being under-priced, although reassuringly, at a slowing rate from recent highs. Currently, circa 46,000 cars with a high Retail Rating (a unique, machine learning derived measure of how fast a car is likely to sell if priced at its market value) score of over 61 have been advertised below their market average from the first day of being listed. As a result, a potential profit of around £30m is being missed.
Looking at the data at a more granular level reveals that many of even the most in-demand vehicles in the market are being priced below their retail value. In fact, 3,400 retailers are choosing to list circa 9,300 of the ‘best-of-the-best’ cars (with a Retail Rating above 81) on Auto Trader below 95% of their respective market average. It represents a potential profit opportunity for retailers of circa £8m.
Nuanced retail market
Highlighting the nuance in the retail market, the average price of sub three-year-old (£28,031) cars are down -9.7% YoY (hampered by the ongoing de-fleeting of the circa 750,000 electric vehicles sold over the last three years), whilst those aged 3-5-years (£19,114) and 5-10-years (£13,352) saw a decline of -9.2% and -4.8% respectively. Used cars aged over 10-years-old, however, are still recording positive price growth, with 10–15-year-old vehicles up 3.7% YoY to £6,457.
When we look at fuel type, prices for electric vehicles are down -21.8% YoY (£28,836), whilst petrol (£15,256) and diesel (£15,111) are down -6.2% and -5.8% respectively. This is despite very favourable market dynamics; across all fuel types, levels of demand growth is outpacing supply, which under normal conditions would maintain price stability. This is especially evident in electric vehicles, where demand growth has increased a massive 65%, whilst levels of supply, is down -2.4%, resulting Market Health rising a whopping 69%.