7:51 am, January 24, 2024
Used car prices are still falling in January but there are plenty of reasons to be positive about the market in 2024, believes Auto Trader’s CEO.
Marketplace boss Nathan Coe has given his opinions exclusively to Car Dealer Live (video above) about the latest on used car pricing, the health of the second hand car market and his justification for putting up car dealers’ advertising prices.
In a wide-ranging interview, Coe also gives his opinions on the FCA’s investigation into historic finance commission payments and explains why he believes used electric cars present a great opportunity for car dealers.
And he also outlines the new products Auto Trader is launching to assist dealers make more data-led decisions, including a forward-looking used car pricing product called Trended Valuations.
Coe said Auto Trader has not seen retail prices rebound in January following the dramatic trade drops seen in the last quarter of 2023.
He said: ‘So far in January, prices are down about 7% year on year, which was a little bit more than December.
‘It’s not a massive move and we are starting to see pricing stabilise now, but we’re literally talking about the last few days and weeks. It’s something that we’re watching very, very closely.’
Despite this, Coe says all the indicators Auto Trader is seeing point to a used car market in good health – despite a relatively slow start to the year.
He said: ‘All our market health metrics are feeling pretty strong. It looks like used car sales so far in January are up 6%, so that’s pretty good.’
The advertising platform has recently said that it believes car dealers are ‘missing out’ on up to £31m of profit due to under pricing on its site.
Auto Trader analysts found that 47,500 cars currently for sale from 8,000 different retailers, were being advertised for below their average retail market price.
Coe said: ‘I think all retailers should know we don’t just make pronouncements from on high – we are always checking with retailers.
‘We don’t overlay editorial opinion at all, there is no opinion in any of our numbers. The reason why I have confidence that the cars don’t need to be at that lower price is because I see lots and lots of retailers in the metric that are pricing at market and still achieving good sales and better margins.’
Coe said the market was experiencing very different things in different price ranges of cars with some areas performing far better than others.
He added: ‘We’ve gone through a period where not many new cars have been produced for a number of years and we’ve seen new car sales declining.
‘So those cars, aged five years plus, are actually experiencing pretty good dynamics. In the under three-year-old category, we are seeing more supply, so actually, that’s a little bit tougher trading.’
Coe said he understands many used car dealers’ reluctance to stock electric vehicles as many had their ‘fingers burned’ with the huge falls in value last year – but he still thinks there’s an opportunity to be had.
He said this is because EVs had reached a price parity with petrol and diesel equivalents in the used market making the choice to swap easier for used buyers. In the new market, EVs are still commanding a premium.
Coe said EVs are among some of the ‘fastest used cars to sell’, according to its data.
Dealer ad price rises
The Auto Trader boss said car dealer advertising packages will be going up on April 1 and that account managers should have already explained the changes to its customers.
He said Auto Trader likes to be ‘super transparent’ about its price rises and explained it was the only way to get a return on its investment in new products.
He said: ‘We basically spend the whole year working out and building and delivering products that we think will make retailers a lot more money than any price increase that we might have.
‘So say prices went up 5% or 6%. For the average retailer that might be just over £200 a month. That’s just over £55 a week. So can we give them data? Can we give them advice? Can we work in partnership with them? Can we, through Deal Builder, add more than £55 to every one of our customers a week in terms of value, that’s what we think about.
‘Maybe with omni channel retailing or if we can stop retailers reducing a price by £400 or help them avoid a car that they might end up eating margin on then £55 a week is a relatively small amount.
‘But we still know it’s a big amount to our retailers, which is why we do work our tails off to ensure throughout the year we’re adding at least that value.’
Coe encouraged dealers who felt they were being charged too much to talk to their account managers about how they can make the most of the platform.
New products
Auto Trader will soon be rolling out its Trended Valuations product and an enhanced Retail Check product for all customers.
The first will give dealers an idea of what will happen to used car prices over time so they can make decisions on pricing now, while Retail Check will overlay lots of data points to help dealers buy and sell cars smarter
Coe explained: ‘We are obsessed about the data and we’re launching two new data products which is Trended Valuations and Retail Check. We want to make sure retailers have got the data in their hands in a form that they feel like they can use.’
The new products will be rolling out soon to all Auto Trader customers.
Looking ahead to 2024
Coe explained during the video chat that he was ‘cautiously optimistic about 2024’.
He said: ‘I still stand by our view that the market feels robust and, and solid as we head into the year. But it’s not all average, the average is made up of, you know, millions, hundreds of thousands of different cars and actually each of those will be moving differently.
‘So, paying attention to data and using your experience is key to doing well.
‘In the last few years, if you could get your hands on cars at reasonable prices you were going to do okay well, that was awfully nice while it lasted, but it was never going to last forever – I think we’re in a bit more of a normal market now.’
Coe also explained that he did not think the risk surrounding the FCA’s investigation into historic commission payments paid out to dealers should be ‘underestimated’.
He added: ‘I think some of the big questions around this will be where does the liability fall? Does it fall more with lenders? Or does it actually go to the retailers who were actually brokering the finance and who may have selected a particular APR? We do think it’s a really big deal and definitely one to watch closely.’
Auto Trader is the headline partner of our forthcoming Car Dealer Live event which takes place on March 7. Full details and tickets are available from the event website.
