Normality Returns! Used Car Prices Settle, But Can You Snag a Bargain?

Auto Trader's latest data reveals that retail prices on its platform dropped by 0.7% month-on-month (MoM) and like-for-like in May.

They noted that, excluding the pandemic years of 2020 and 2021, retail prices have consistently fallen every May after rising in April since they started tracking prices in 2011.

Auto Trader stated that the used car market remains robust, even with the return to typical seasonal trends.

The company registered nearly 83 million visits to its platform in May, marking an increase of approximately 11% compared to the same period last year, and a nearly 20% surge since May 2022. This uptick in engagement is attributed to the escalating levels of consumer demand, which, as per Auto Trader’s data, experienced an 8.6% year-on-year rise in May.

According to Auto Trader data, the average speed of sale was 29 days in May, one day longer than in April but one day shorter compared to May 2023. However, this trend is nuanced, with volume brands taking 27 days to sell, whereas 3-5-year-old cars left dealers’ forecourts in just 26 days. Furthermore, the company noted a roughly 6% increase in used car transactions last month, propelled by the robust demand in the market.

In May, there was a 2.2% decrease in stock volume, the biggest drop since June 2023, particularly affecting mid-market cars.

Newer car stock saw a 39% increase YoY, while older stock aged over 10 years rose by nearly 12%. However, the supply of 1-5-year-old stock decreased by 17.3% YoY due to the flow of 'missed' sales from the pandemic.

Auto Trader noted that these market shifts, coupled with increasing consumer demand, are fostering highly favorable market conditions.

The Market Health gauge, indicating market profitability, saw an uptick to 11% in May, up from April's 10%, marking the highest growth rate since July 2023. Within the 1-5-year-old stock category, it surged by 36% YoY. Auto Trader cautioned that dealers appear to be setting prices for high-demand used cars above market value.

Presently, about 9,000 dealers are listing roughly 70,000 cars with a Retail Rating score exceeding their market average. This trend is eating into retailers' margins, potentially resulting in losses of around £35 million, averaging about £4,000 per retailer, the company disclosed.

Richard Walker, the director of data & insights at Auto Trader, commented that the second quarter has witnessed a resilient used car market: retail prices are stabilizing, demand remains strong, vehicles are selling swiftly, and notably, transactions exceed last year's figures. He attributed any minor month-to-month price softening to seasonal factors.

Walker emphasised the market's buoyancy, citing economic green shoots, including rising consumer confidence due to decreasing inflation and anticipation of forthcoming tax cuts. He acknowledged potential disruptions in July due to the Euros and General Election but reassured that any impact on car purchasing would be temporary, maintaining a positive outlook for the year ahead.

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Source and Image: CarDealerMagazine