8:30 am, March 12, 2024
If the current rate of used car sales continues, 2024 could be the best year for the second hand car market since before the pandemic.
That’s according to research by Auto Trader, delivered exclusively to attendees at last week’s Car Dealer Live.
The advertising marketplace gave an overview of the used car market so far in 2024 and took a look at the forces of change dealers will soon be facing.
Chief operating officer Catherine Faiers – who was our guest on the latest Car Dealer Podcast – said all the market indicators the firm are seeing so far in 2024 are positive.
She said: ‘If the current transaction rate that we’re seeing continues, we would expect 2024 to be one of the highest, if not the highest, used car transaction market that we’ve seen since 2019.
‘Demand is currently tracking up about 7%, supply is up 3%, we’ve seen record breaking audiences on our platform, and we’ve seen strong speed of sale. So observations look good.’
She said consumers are confident too. The firm surveys 25,000 used car buyers each year and said the latest results show ‘a lot of positivity’ around affordability.
However, Faiers admitted that it’s a different picture depending on what stock car dealers focus on. She said three to five year old cars are in short supply because of the reduced sales during Covid, while the number of used EVs on the market have rocketed – there are some 15 times more than in 2019.
Faiers went on to explain what the firm had seen happen in used car pricing in recent months. She addressed the large trade value drops – some 10.5% in the final quarter of 2023 – and how that impacted retail prices.
Faiers encouraged dealers not to follow ‘what is happening at auctions’ and instead to price their cars by working back from what they can sell them for.
She said: ‘Pricing has dominated our conversations with retailers over the last few months for obvious reasons. And it’s been a huge challenge.
‘We’ve never seen, in the time that we’ve been tracking the retail data, a disconnect that’s this big between what we’re seeing in the retail market and what’s playing out in in the wholesale market.
‘We’re saying to retailers to follow the retail market, don’t follow what’s happening at the auction, because there is a disconnect.’
In the detailed research session at Car Dealer Live, Faiers was joined by Wink Cars co-founder Joanna Smith. The relatively new used car dealership was started just over two years ago and was a runner-up in the newcomer category at the Used Car Awards 2023.
Smith said she priced her cars using Auto Trader’s data and wasn’t afraid to pay over Cap prices if she could see there was still a ‘decent margin in the car’.
EV opportunity
Faiers also explained the opportunity that used EVs represent to dealers during the session.
She admitted that many had had their fingers burned by the huge price drops electric cars suffered last year, but said as EVs reached ‘price parity’ with petrol and diesel equivalents, consumers were increasingly keen to buy.
‘I totally understand and see the reticence to dive back into a market that’s just proved incredibly challenging and difficult for people,’ she said.
‘But in the used market, electric vehicle transactions are up 80% year on year. They have consistently been some of the best performing stock on our platform for the last six months or so.
‘And that’s all driven by the price correction that we saw around this time last year. So we’ve got a number of big, volume models now at price parity with their ICE equivalent.
‘And when you have that price parity, consumers are absolutely prepared to pay the price and are prepared to maybe take some of the hassle, the compromise that comes with charging or switching – they’re prepared to do that when the price is right.’
Faiers said that on average used electric cars are selling some 10 days faster than petrol and diesel cars on its platform at just 23 days. And she explained that 90% of new electric car buyers are also considering a used EV.
Wink Cars founder Smith admitted that the EV data clearly points to an opportunity, but said she had been scared of selling electric cars so far by some ‘big bills’ with problematic hybrids.
Digital retailing
Yesterday, Car Dealer reported Faiers’ comments on omni channel sales killing off the online-only sales model. At Car Dealer Live, she said it has ‘now been proven you need a physical presence’.
‘There is a small segment of consumers that wants to buy online and will buy end to end online,’ explained Faiers.
‘But that segment is actually quite a bit smaller today than it was a few years ago. Then, everyone was talking about online retailing being the future, but we’ve been talking for some time about omni channel retailing being the future. And for us, that means combining the best digital journeys with a brilliant forecourt experience.’
Faiers said dealers should set up their businesses to offer consumers the chance to complete many of the sales tasks they want to do in advance online.
She added: ‘The vast, vast majority of consumers tell us that they really want a physical experience. They really want either human support with an element of the journey, or they want to experience the product in person. So that physical element has become kind of essential and is considered essential by most consumers.’
You can watch all of the Car Dealer Live sessions back on the CarDealerLive.co.uk website with a replay ticket. All are available on video to watch at your leisure.
You can also read the detailed Auto Trader research paper by downloading it here.
