Dealers are selling a quarter of used cars too cheaply, says Indicata

Retailers are failing to keep pace with rapidly increasing used car values and selling one in four cars too cheaply, according to Indicata.

Analysing dealer used car market prices in real time, the Indicata platform is identifying cars every day that are below current market values because of not being re-priced since dealers re-opened for business on April 12.

Indicata is also warning dealers that advertising cars too cheaply can deter potential buyers.

Jon Mitchell, Indicata’s group sales director, said: “From a consumer’s perspective when a used car looks too cheap during an online search, they immediately think it has been wrongly described, or it is likely to have been sold.

“Dealers have to stay in tune with current market prices to help build consumer confidence with online buyers.

"And for the past few weeks that has meant checking market values daily and then increasing rather than reducing prices.”

The company highlighted a Ford Fiesta, which was listed at £6,995, sat at 94% of its market price after 35 days in stock.

The dealer planned to reduce it but as the average market price had risen to £7,436. Indicata advised them to increase the price by £500. The car sold that weekend at screen price.

A BMW 5-Series, meanwhile, was listed for sale by a franchised dealer at £29,500. After 50 days in stock, it had been reduced four times to £27,000. In this time the market price had fallen and then increased to £29,500.

The dealer car was cheaper than its competition and looked out of kilter on its website, so Indicata encouraged it to increase the car back to £29,500 which went against the dealer’s gut instinct, but four days later it sold.

Auto Trader claims that used car prices have risen by 8.1% year-to-date, driven by the growing imbalance of supply and demand levels in the market.

Many in-stock used car prices either remain static or are being marked down, while market prices are rising and demand is exceeding supply.

Cap HPI reported recently that of the 11,643 models on its platform, prices on 11,175 rose at the end of May, while 354 remained static and just 114 fell in price.