9:48 am, December 19, 2023
Dealers are seeing strong sales of used cars as 2023 closes, but a ‘disconnect’ between trade and retail values is leading some to slash prices unnecessarily.
Earlier this month, used car dealer Phil Johnston of Spencer Flint Automotive told the Car Dealer Podcast retail used car prices are not falling as fast as trade guides suggest.
Cap HPI reported used car trade values fell by 4.2% in November which followed an identical drop in October.
However, for the same month, Auto Trader revealed used car retail prices had fallen by a more modest 2.5%.
The wide gap led Auto Trader to say trade prices only ‘show one side of the story’, and, in a separate briefing with Car Dealer, the company said there was a ‘disconnect’ between retail and trade values.
In that briefing, Auto Trader also revealed dealers are responding to headlines concerning the difference between trade and retail values, and risking profit potential.
Auto Trader directors told Car Dealer that retailers are already slashing prices across the board.
In a survey conducted in the final weeks of November and in a pricing webinar held on December 1, 68% of independent dealers told Auto Trader that they are reducing retail prices, while for franchised that number rose to 80%.
Now, in a Car Dealer Live interview, Auto Trader commercial director Ian Plummer has put a value on the underpricing that’s currently being carried out and urged car dealers to ‘look at the data’.
‘The price indicators we have on Auto Trader are a reaction to what retailers are positioning the cars at, but they are also what the consumer will see,’ he said, in the video posted at the top of this story.
‘With the price indicators, we can see a large cohort of cars are being underpriced when they’re coming to market…this cohort represents a lost value to retailers of around £32.7m.
‘That means there’s £32.7m of underpricing happening on cars that have a high demand that would ordinarily be bought happily by consumers seeing price indicators on Auto Trader, which would position those cars at the ‘Good’ and ‘Fair’ pricing level of base 100.
‘That equates to around £4,200 per retailer – there are nearly 8,000 retailers in the category of people doing what I have just described.
‘Now more than ever there are opportunities being missed.’
Plummer added that in the last two weeks the wave of underpricing has jumped by around £4m.
‘The phenomenon, the sort of contagion factor, is getting worse rather than better.
‘I just urge people to look at the values their retail customers are seeing and not miss those tricks, particularly on those high retail-rated cars.’
Plummer explained this nervousness among dealers and their propensity to be reducing prices comes as Auto Trader data shows sales of used cars is strong.
‘It is understandable [in December] to see a slowdown in sales numbers compared to the month prior. But actually, when you look at the month a year prior, the numbers are very good,’ he said.
‘When you look at any of our metrics in terms of market health – that’s described as the balance of supply and demand – it’s looking robust and up about 9% on prior year.
‘Speed of sale is also very good – we’re trading 32 for November which is the same as November prior year, and 33 at the moment for December which standards against 36 last December.
‘So, pretty good market health, but most importantly for retailers that’s resulting in strong sales numbers.’
Elsewhere in the video interview, Plummer explained Auto Trader’s predictions for 2024, which include an uplift in used car sales to 7.24m sales (up from 7.17m forecast for 2023).
Click the video at the top of the story for full interview
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