The average retail price of a used car in November was 3.8% lower than a year previously, Auto Trader data shows, marking the third consecutive month of retail price decline.

It almost mirrors declines being recorded in the used car wholesale market, where Cap HPI recently reported to AM that dealers have become more conservative about the prices they’ll pay and the quantity of stock they want to hold in the run up to Christmas.

Auto Trader pointed out that despite the headline decline, its data shows consumer demand remains robust and dealers are still selling their stock in good time, so it warns against slashing margins to give high discounts.

The issue is most acute for franchised dealer networks, because of better availability of new cars and Q4’s consumer offers.are tempting some consumers.

Cars aged above five-years-old were actually up 1.3% YoY last month, whilst those aged over ten years-old increased 6.8%.

It is a fall in retail prices among younger aged cohorts pulling the overall figure down. Those cars aged up to five-years-old recorded a -6% drop in November, due to a combination of increased supply over recent months, as well as increasing pressure from new-car deals, particularly among electric vehicles (EV).

This nuanced picture is reflected across different segments of the market. The average price of low emission vehicles was down -11.9% against November 2022; EVs in isolation, fell -21.1%. Their traditionally fuelled counterparts however, softened just -1.8% YoY. It’s a similar picture at a brand level; whilst premium and super premium cars dropped -6.5% and -3.6% respectively, the average retail price of volume brands contracted just -2.1%.

Auto Trader’s data reveals that demand, as determined by consumer engagement on its platforms, has increased on last year across all market segments, including ‘nearly new’ cars (those aged less than 12 months old), which have seen demand growth (39% YoY) outpace supply (29% YoY) for the first time in over a year. At a total market level, demand growth is up 9% on November 2022, marking an increase on the 6.8% recorded in October, as well as the third highest rate recorded this year.

With current levels of consumer appetite ahead of the volume of stock entering the used car market (up 2.8% YoY), Auto Trader’s Market Health metric, which assesses market profitability based on supply and demand dynamics, rose from 4.3% YoY in October, to 6.1% last month. It’s a considerable increase on the -11.3% decline recorded in November last year, when the market was affected by the economic uncertainty and disruption caused by the then Prime Minister, Liz Truss’ ‘Mini-Budget’, which fuelled a rapid growth in inflation and interest rates.

Today, the market faces less uncertainty, and as a result, Market Health across all but two segments have improved on last year’s levels, and consequently, so too has the speed in which used cars are selling, which at a total market level was just 31 days. Unusually for this time of year (when the speed of sale typically slows between October and November), it was flat against the prior month. It’s also faster than pre-pandemic norms; it took an average of 33 and 35 days for cars to sell in November 2019 and 2018 respectively. Further highlighting the robustness of the used car market, Auto Trader saw 69.8 million visits to its marketplace last month, which is a 12% increase on November 2022.

Despite the positive growth in Market Health and the favourable supply and demand dynamics, Auto Trader’s data indicates there’s been a recent increase in re-pricing activity, with retailers making broad price reductions across their forecourts. 16% of all cars being advertised on Auto Trader were priced below their market value in November, which is a significant increase on the already worryingly high 14% recorded in October and suggests retailers are leaving potential profit on the table.

Auto Trader’s director of data and insights, Richard Walker, said: “As we’ve been reporting for some months now, retail prices remain robust across segments of the market, demand is increasing, and cars are selling quickly. I’d urge retailers therefore, not to give up potential opportunities based on trade data alone, which only show one side of the story. Car buyers aren’t aware of wholesale trends and are prepared to pay what they think is a fair price based on the retail market value, not what a retailer paid it for.

“With trade and retail prices no longer in sync, there’s an opportunity for retailers if they use a complete view of the market to guide their decisions. Every car has a retail price at which it will sell, so retailers should take a vehicle-by-vehicle approach and use the right metrics to spot the most profitable stock for their forecourts. More than ever, the opportunities are in the detail.” 

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• Source: https://www.am-online.com/news/market-insight/2023/12/04/third-consecutive-monthly-drop-in-used-car-values-auto-trader-reports