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Used car market unlikely to return to ‘normal’ as dealer nerves begin to increase

Auto Trader’s Catherine Faiers explains how dealers are facing uncertainty as they adapt to a new market that’s going ‘to take years to play out’  in a video interview above – sponsored post

Time 7:45 am, November 1, 2023

The used car sector is unlikely to ever return to a pre-pandemic ‘normal’, and dealers will have to adapt to a new market with different trends.

That’s the view of Auto Trader which has given Car Dealer a market update as the clock ticks down to the final weeks of the year.

The firm’s chief operating officer, Catherine Faiers, told Car Dealer in a special video interview (above) that dealers are facing uncertainty as they adapt to a new market that’s going ‘to take years to play out’.

She said: ‘We’ve seen a period over the last three years or so where cars were appreciating in price, and the seasonal trends that we used to see before the pandemic just weren’t really there in the same way.

‘With massive supply shortages, we saw retailers having to think about sourcing, pricing, and other key business strategies – it all had to change. That historic performance data we used to rely on for stock availability and pricing is no longer that helpful, because we know, looking forward, structurally the market is going to look quite different.

‘We’re not seeing a return to pre-pandemic trends in the data, we’re seeing a very new and different market taking shape – and one that’s going to take years to play out.’

Faiers continued: ‘Electrification means the whole car parc is changing and we’ve got very little historic data to guide us on that. We’re seeing new brands come to market with new models at a rate that we’ve never seen before, and we have no history of valuation data on those brands or on those makes and models.

‘We’ve also got a consumer segment who don’t really know these brands, don’t understand the different models and that data on specification. And data on each vehicle is only going to become more important.’

Faiers explained that in light of this, dealers need to have a ‘vehicle-lead view’ not a ‘forecourt-lead view’.

‘It’s really hard,’ she said.

‘It would be almost impossible to set rules and policies across types and ages of stock because of these trends [supply dynamics, return to production levels, post-Covid trading, the shift to electric vehicles] are all playing out at the same time.’

Dealers are facing further complexities due to pricing, too.

‘Pricing is definitely the biggest challenge that we’re all navigating,’ said Faiers.

‘Pricing movements, in particular those pricing movements for younger age cohorts, have been playing out differently due to supply dynamics.

‘We’ve definitely seen some softening over the last few months, but we haven’t seen the level of step-down on retail pricing that has been reported on trade values.

‘September was the first month where we saw year-on-year declines in retail prices. It was a small percentage movement, but it was a decline, and that’s the first time we’ve seen this for more than 40-odd months. For October we’re seeing the same but with a slight step-up in that rate of decline.

‘At this time of year we would expect to see some seasonal softening, but I do think it’s a bit more than that.

‘We’re seeing a nervousness among retailers – some of that I think is driven by the trade [pricing] projections; and also concerns over the level of supply growth in the new car market and more of a return to volume, short-cycle business and discounting cars. Couple that with some worries over how and where consumer demand might trend, we’re seeing more nervousness than we might have seen.’

She added that despite all of this, consumer demand is ‘robust’, but that transaction volumes and speed of sale are ‘varying by cohort’.

In the video, Faiers explained the ways Auto Trader is trying to help dealers adapt to this new market, including launching new products such as ‘Trended Valuations’ and making its ‘enhanced retail check’ features available to all dealers from early next year.

You can watch the full interview by clicking the video at the top of this story.

James Batchelor's avatar

James – or Batch as he’s known – started at Car Dealer in 2010, first as the work experience boy, eventually becoming editor in 2013. He worked for Auto Express as editor-at-large and was the face of Carbuyer’s YouTube reviews. In 2020, he went freelance and now writes for a number of national titles and contributes regularly to Car Dealer. In October 2021 he became Car Dealer's associate editor.

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