7:25 am, February 15, 2022
Used car prices are unlikely to drop significantly for at least a year as new car supply continues to push prices up.
That’s the view of one of Auto Trader’s chief operating officer Catherine Faiers who was speaking exclusively to the Car Dealer Podcast this week.
Faiers said all the factors that pushed used car prices up to record levels in 2021 are still prevalent now – and they don’t look like they will improve any time soon.
Auto Trader’s latest data shows January saw the average used car price increase by 31.3 per cent compared to the same month last year.
It is the 22nd consecutive month of price growth driven, says Auto Trader, by ‘high levels of demand and low stock availability’.
The average price of a 1-3 year old used diesel SUV has risen from £31k to £42k while a 3-5 year old petrol hatchback has risen from £8k to £13k, says the advertising giant.
‘We think it is going to go on for now,’ Faiers told the Car Dealer Podcast.
‘All of those demands are still there in some way shape or form.
‘All of the consumer data suggests that consumers care more about owning a car.
‘Affordability is still tracking very strongly despite concerns over real wage growth, or lack of real wage growth in the last few months.
‘Demand looks robust and set to continue and we still haven’t caught up anywhere near to the 1.5m transactions that were lost during the pandemic.’
Fairs said it is the new car production issues – still hampered by a lack of semiconductors for the automotive industry – that is causing used car prices to hold firm.
‘The big question and the big unknown is the supply side and quickly the new car market comes back,’ she said.
‘There’s nothing that we are hearing in H1 that suggests there is going to be any big step change in new car supply.
‘For some brands volumes are beginning to step up, but it’s gradual increments and we expect that will continue for H1 and continue to improve into H2.
‘But most of the manufacturers we are talking to are saying it will be 2023 before volumes look anything like what they would consider to be normal.
‘Certainly for 2022 the used car market will look a lot like it did last year.’
Will new car prices go up?
The Auto Trader director believes that new car prices could also rise as a result of the production issues the industry is facing.
‘We think new car prices will have to adjust,’ said Faiers.
‘We have one in five nearly new cars that are less than a year old currently priced ahead of their new equivalents.
‘When you look at commodity prices for manufacturers I think we are going to see – and should expect – manufacturer recommended retail prices for the cars coming to market to go up.
‘Not just because more electric cars are coming and more EVs are part of the mix, but just because unit costs are going up as well.
‘That consumer confusion over the new versus used differential should normalise during the course of this year.’
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Faiers was also asked on the Podcast whether car dealers could expect their Auto Trader bills to rise this year.
‘We’ve grown market share and delivered more value to our customers than any other year,’ she said.
‘Each year we do review our packages and products and we have done the same thing this year.
‘We’ve launched Auto Trader Connect which we think is a game changer for the industry and we have made that available to all of our customers.
‘We will look at product and package mix as we always do but we are confident more than ever that the value we are delivering to our customers is more than it has ever been.’
You can listen in full to the episode with Faiers by clicking play on the player embedded in this story, or by searching for Car Dealer Podcast on Apple Podcasts, Spotify and more.
