Used car sales up 5% but prices remain at record highs

Nearly 1.8 million used cars changed hands in the first three months of 2022, a 5% year-on-year increase, according to figures released this morning.

Demand for used motors remains exceptionally high due to tight production of new cars linked to the global shortage of semiconductors and the continued shortage of supply that has hammered the sector for two years.

Growing waiting lists for new engines have led to an increased appetite for the used car market, driving the value of used vehicles skyrocketing, with the average price nearly a third higher to what it was just 12 months ago.

Demand for used cars remains strong: Used motor sales rose 5% year-on-year in the first three months of the year, according to new data from the motor trade body

Some 1,774,351 used car transactions took place in January, February and March, the Society of Motor Manufacturers and Traders said Tuesday.

An additional 86,596 cars changed hands compared to the same period a year ago, but it should be noted that showrooms nationwide were closed for much of the first quarter of 2021 due blockages linked to the pandemic and that only “click and collect” sales were authorized.

Despite the growth in the first three months of the year, used vehicle transactions remain 12.2% lower than the pre-pandemic year of 2019.

However, electric cars bucked the trend with another record quarter.

Sales of used pure electric vehicles more than doubled from 6,625 to 14,586 – an increase of 120.2% – although they still represent less than 1% (0.8%) of all transactions .

Jamie Hamilton, automotive director and head of electric vehicles at Deloitte, said that for early adopters of electric vehicles, these numbers “should inspire confidence in the residual value of their vehicle which ultimately also trickles down to larger financing deals. attractive for new car sales and fleet renewal”. ‘.

Plug-in hybrids and conventional hybrid cars also changed hands in greater numbers than the previous year, rising 35.3% and 28.8% respectively, but petrols and diesels still account for more than 19 engine sales used out of 20.

The growth of the second-hand market stands in stark contrast to the new car sector, with registrations down 34.1% over the same period, as vehicle production continues to be constrained by a shortage of semiconductors and wider supply issues.

SMMT chief executive Mike Hawes said growth in the used car market “is welcome” in light of the ongoing supply shortage that is strangling manufacturers, but said it was not “not surprising given that we were stuck last year”.

Richard Peberdy, head of automotive at KPMG, added: “The rising cost of living is cooling the used car market slightly, but demand remains high and is expected to continue until the issues affecting the production of new cars are resolved and more supply enters the used car market. It is unlikely to be this year.

The average price of a used car in April was £17,418, almost a third higher than the same month of 2021, according to Auto Trader

The average price of a used car in April was £17,418, almost a third higher than the same month of 2021, according to Auto Trader

Have record used car prices hit a ceiling?

The latest data from the Auto Trader indicates that the average value of used cars in April was 32.2% higher than a year ago, marking a 25th consecutive month of rising prices.

The average price of a used car in April was £17,418, based on advertised prices of around 900,000 vehicles listed on the website.

However, he says he is starting to see signs of stabilizing growth, with only a marginal increase from the 32% year-on-year rise in March, which could be a signal that the market has bottomed out. .

He said the slight deceleration in average second-hand prices “is the result of a number of factors, including the fact that growth is now overlapping last year’s already very high levels.”

The used car market added that slowing consumer demand fueled by the cost of living crisis has also impacted the market, which in turn has seen values ​​falter as dealers look to attract customers.

But while record prices on the occasion could eventually stagnate, Auto Trader says there is no indication in the data that prices will reverse.

Indeed, the shortage of semiconductors – which has caused used car prices to soar – continues to affect manufacturers, who are now constrained by additional issues, including sourcing components from Russia and of Ukraine and the slowdown in the Asian market.

Commenting on April’s performance, Richard Walker, Auto Trader’s chief data and insights officer, said: ‘There are clearly potential economic headwinds to consumer demand, but from what we are seeing there are There are still solid levels of appetite for new and used cars in the market.

“Add to the fact that the continued squeeze in new car supply is likely to widen, in part due to the current geopolitical situation, we are confident that used car prices will remain elevated for some time to come. .”

He adds that while younger cars – which would normally enter the used market at the end of a lease or finance contract – have been heavily impacted by the downturn in the new car sector, there has been a strong appetite for older cars, especially those between five and five years old. and ten years – where the stock is much less problematic.

“Sales in this segment were up 20% from 2019,” according to Auto Trader’s own data.

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