8:05 am, June 3, 2024
Used car prices have returned to ‘seasonal norms’ but dealers are still underpricing the most in-demand used cars, says Auto Trader.
New data published by the company shows retail prices on its platform softened by 0.7% on a month-on-month (MoM) and like-for-like basis in May.
It said that apart from the pandemic influenced 2020 and 2021, retail prices have dipped every May following an April uptick since it first began tracking retail prices in 2011.
The used car market is in a strong place, despite the return to seasonal norms, said Auto Trader.
The firm reported nearly 83m visits to its platform in May – and increase of around 11% on the same period last year, and an almost 20% rise since May 2022.
Increased engagement is being driven by growing levels of consumer demand, which according to Auto Trader’s data, rose 8.6% year-on-year in May.
Average speed of sale stood at 29 days in May, according to Auto Trader data – one day longer than in April but one day less compared with May 2023. But this is ‘nuanced’, it said, with volume brands taking 27 days to sell, while 3-5-year-old cars left dealers’ forecourts in just 26.
The company also reported that used car transactions rose around 6% last month, fuelled by the very robust demand in the market.
Meanwhile, the volume of stock fell again in May by 2.2% – the largest drop since June 2023 – with cars in the middle of the market being squeezed the most.
The data showed stock for cars less than a year old rose 39% YoY, and nearly 12% for those aged over 10 years old. However, as the circa three million ‘missed’ sales during the pandemic continues to flow through the market, supply of 1-5-year-old stock fell 17.3% YoY.
This softening along with rising consumer demand is creating ‘very favourable market dynamics’, said Auto Trader.
Its Market Health metric, which assesses potential market profitability, rose to 11% in May, up from the 10% recorded in April. It marks the highest rate of growth since July 2023. For stock aged 1-5-years-old, it rocketed 36% YoY.
Auto Trader did issue a warning, though. It said dealers are ‘choosing’ to price very high-demand used cars ‘bowl market value’.
Around 9,000 dealers are currently advertising around 70,000 cars with a high Retail Rating score below their market average. This is ‘eroding retailers’ margins, potentially costing around £35 million, or circa £4,000 per retailer’, the form said.
Richard Walker, Auto Trader’s data & insights director, said: ‘We’ve seen a very robust used car market so far in Q2; retail prices are stabilising, demand is healthy, cars are selling quickly, and critically, transactions are above where they were last year.
‘Any slight month-on-month softening in prices is entirely seasonal. The market is being boosted by economic green shoots, with consumer confidence rising in the wake of falling inflation and anticipation of further tax cuts on household budgets.
‘There may be some disruption in July with the Euros and General Election, but the impact on car buying will be temporary, and our outlook for the year ahead remains positive.’
