Business

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

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

Demand for used engines remains exceptionally high due to constrained new car production related to global semiconductor shortages and the ongoing supply shortage that has plagued the sector for the past two years.

Growing waiting lists for new engines have fueled an increased appetite for the used car market, which has sent used car values ​​skyrocketing, with the average price nearly a third higher than it was 12 months ago.

Used car demand remains strong: Sales of used engines rose 5% year-on-year in the first three months of the year, according to new data from the Automobile Trade Association

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

An additional 86,596 cars changed hands compared to the same period last year, noting that showrooms nationwide were closed for much of the first quarter of 2021 due to pandemic-related lockdowns, and only “click-and-collect” sales were allowed.

Despite growth in the first three months of the year, used car transactions remain 12.2 percent below pre-pandemic 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 — up 120.2 percent — although they still account for less than one percent (0.8 percent) of all transactions.

Jamie Hamilton, Automotive Director and Head of Electric Vehicles at Deloitte, said that for first-time EV adopters, these figures should ‘inspire confidence in the residual value of their vehicle, which eventually translates into more attractive financing deals for new vehicle sales and fleet renewals’.

Plug-in hybrids and conventional hybrid cars also changed hands more frequently than last year, up 35.3 percent and 28.8 percent respectively, but petrol and diesel still account for more than 19 out of 20 used car sales.

The growth of the used-car market is in complete contrast to the new-car sector, where registrations fell 34.1 percent over the same period, while vehicle production continues to be constrained by semiconductor shortages and major supply problems.

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

Richard Peberdy, Head of Automotive at KPMG, added: “The rising cost of living is slightly cooling the used car market, but demand remains high and is likely to continue until the issues impacting new car production are resolved and more supply is available the used car market comes onto the market. That’s unlikely to be the case this year.’

The average price of a used car in April was £17,418 - almost a third more than the same month in 2021, says Auto Trader

The average price of a used car in April was £17,418 – almost a third more than the same month in 2021, says Auto Trader

Have record used car prices reached a ceiling?

Latest data from Auto Trader claims that average used car values ​​in April were 32.2 percent 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 site.

However, there are signs that growth is flattening, with only a modest rise from the 32 percent year-on-year increase in March, which could be a signal that the market is topping.

The slight slowdown in average used prices is “the result of a number of factors, not the least of which is that growth is now overlapping last year’s already very strong levels.”

The used car market added that weaker consumer demand, fueled by the cost of living crisis, also impacted the market, which in turn led to depreciation as dealers tried to attract customers.

But while record used prices may be leveling off, Auto Trader says there’s no indication in the data that prices will reverse.

That’s because semiconductor shortages – which have sent used car prices soaring – continue to impact manufacturers, who are now being constrained by additional issues, not least the supply of components from Russia and Ukraine and the slowdown in Asia Market.

Richard Walker, Auto Trader’s Director of Data and Insights, commented on the April performance, “There are clearly potential economic headwinds for consumer demand, but from what we’re seeing there’s still a robust appetite for new and emerging markets used cars in the market.

‘In addition to the fact that the ongoing bottleneck in new car supply is likely to be prolonged, in part due to the current geopolitical situation, we are confident that used car prices will remain high for some time to come.’

He adds that younger cars – which would normally enter the used market at the end of a lease or finance deal – have been hit hard by the downturn in the new car sector, but there has been a strong appetite for older cars, particularly those between the ages of five and ten years old – where stock is much less of an issue.

“Sales in this segment are up a whopping 20 percent from 2019,” according to Auto Trader’s own data.

SAVE MONEY DRIVING

Some links in this article may be affiliate links. If you click on this, we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow a business relationship to compromise our editorial independence.

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

Source link Used car sales up 5% but prices remain at record levels

Back to top button