Evidence appears to be mounting that used car prices are slowing. After a period of unprecedented rises data suggests that the used car market is at the very least stabilising. But should motor traders be fearing a crash in vehicle values?
eBay Motors Group reports that average used car prices fell in March by 1.1%. This is the second consecutive month of decline though it is after values reached record levels. The average used car price on eBay’s platform now sits at £17,636 which is a £189 drop from its peak.
Auto Trader’s latest data also shows that prices rose just 0.1 per cent in March. The online advertiser analyses the sale prices that car dealers place across the 900,000 vehicles on its platform. This was the smallest monthly increase in over a year. Yet values remain a very healthy 32% up on the same period in 2021.
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eBay also reported that month-on-month average stock volumes increased fractionally to 46.2 units from 45.6. This suggests supply issues eased slightly whilst demand at least remained relatively steady with days to sell just 0.2% lower in March compared to February at 43.4 days.
Dermot Kelleher, head of marketing and research at eBay Motors Group, said: ‘The ongoing supply disruption caused by the global semiconductor shortage will continue to prompt in-market new car buyers to look at used alternatives. Although the dip in advertised prices was the biggest so far this year, prices remain incredibly strong, tracking at 19.5 per cent ahead of where they were 12 months ago.’
Is a Used Car Value Crash On the Way?
Many of our motor trade insurance clients will be concerned by the impact of the cost of living crisis and the war in Ukraine on consumer confidence. The change consumer focus is demonstrated by a survey of 30,000 people carried out by researchers at University College London. It found that people are now more worried about their finances than catching Covid.
Figures for March from the BRC-KPMG retail sales monitor also showed that sales increased by just 3.1 per cent in march, slipping back from a 6.7 per cent rise in February. The data showed that like-for-like retail sales were actually down 0.4 per cent against the same month last year. It stands to reason that rising fuel costs as well as household energy and food bills will influence consumer behaviour. Many people in the UK are likely to change their travel and purchasing habits to reduce non-essential outgoings.
Philip Nothard, insight and strategy director at Cox Automotive, believes the motor trade should brace itself for a ‘challenging year’ due disruptive external factors. He calls it a period of VUCA (volatility, uncertainty, complexity, and ambiguity.) This would be evidenced by the release of sales figures for new cars in March which dropped to their lowest level for 24 years. It was the worst performance since 1998. The 14.3% year on year drop ago, was despite showrooms still being shut in the same period last year due to ongoing Covid-19 restrictions. No wonder the results were branded ‘massively disappointing’ by the Society of Motor Manufacturers and Traders (SMMT). Brexit duties and disruption, the pandemic, micro-chip shortages, the cost of living crisis, consumer confidence decline since the war Ukraine, supply issues due to the war……..factors that serious impact the new car market just keep on coming.
Yet, the motor retail analysts at Auto Trader appear confident that there is no used car price crash on the horizon. Auto Trader data expert Richard Walker says that although price growth is softening, it’s important to put it into context. “Any suggestion prices are about to tumble is unfounded. Despite growing economic pressures, the appetite for new and used cars remains above pre-pandemic levels, which combined with the ongoing squeeze in supply, will keep used car prices strong for the foreseeable future.’”
The Auto Trader man points out that over the last year the average price one year old cars has increased £8,700. One in five nearly new cars under a year old are still priced above their new car equivalents. Nearly new cars are selling on average 22 days faster last month than in March 2021. Despite the likely economic challenges according to Auto Trader consumer demand remains up against pre-pandemic levels by around 4% compared to March 2019.