Dealers urged to avoid needless price corrections as used market remains strong

Retailers are being urged to strategically use data to avoid unnecessary price corrections as the used car market is proving resilient, with electric vehicles (EV) taking the lead in both demand and sales pace.

The used car market entered the last quarter in excellent health, according to the latest data from Auto Trader's Retail Price Index, with average used car prices showing resilience against typical seasonal trends.

In September, the average price of a used car was £16,450, marking an 8.4% year-on-year (YoY) decrease and a marginal 0.3% month-on-month (MoM) decline, outperforming the usual seasonal dip of 0.6% for September.

This strength is attributed to robust consumer demand, with 82 million visits to Auto Trader in September, a 9% YoY increase.

Despite a 5.4% drop in stock levels, used cars are selling faster than last year, with an average turnaround of just 27 days.

This is one day faster than in August and four days quicker than September 2023.

Retailers have also seen a 5% increase in used car sales YoY, with 2024 maintaining a positive trajectory and a 3.9% sales increase year-to-date.

These favourable conditions, combined with strong demand and lower supply, indicate that retailers should avoid prematurely reducing prices, which could erode margins.

Richard Walker, Auto Trader’s data and insights director, cautioning retailers, said: "2024 has been consistently strong... We saw many retailers adjust their retail prices in line with trends in the wholesale market last year, which resulted in a significant loss of margin potential. Retailers should rely on retail data to avoid unnecessarily reducing profit potential."

While the new EV market continues to face challenges, the used EV market is flourishing, with demand up 50% YoY.

EVs are selling faster, averaging 26 days on the market, and prices are stabilising, with a slight MoM decline of 0.1%.

Notably, 3-5-year-old used EVs are experiencing particularly strong demand, with a 110% surge in interest compared to 2023. These vehicles sell in just 19 days on average, over a week faster than the broader market, and prices rose 1.6% in September.

However, the market for nearly new EVs - under one year old - remains more challenging, with these vehicles priced £7,000 higher than their internal combustion engine (ICE) equivalents. They are also taking longer to sell, averaging 43 days in September.

Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), noted the importance of the growing used EV market: “The resilience of the used car market remains evident... It is promising to see an increase in demand for used electric vehicles, particularly in the 3-5-year-old category, highlighting the developing market and shifting consumer preferences."