Richard Walker, Auto Trader's director of data and insights
In fact, October was the 19th consecutive month of growth, with prices increasing a record 25.6% on a year-on-year and like-for-like basis. It not only marks the largest monthly jump in growth recorded, up from 21.4% in September, but such is the recent acceleration in prices, the average price of a second-hand car has increased nearly £3,000 in just five months, rocketing from £13,973 in May to £16,878 in October.
Highlighting just how strong the used car market currently is, nearly one in four (22.2%) of the nearly new cars available in the market (those aged up to 12 months) are currently more expensive than their brand-new equivalents. This is a significant jump on the previous all-time high of 17% recorded in September, and nearly six times as many than in January (4%).
This growth is continuing to be driven by unique market dynamics, the exceptionally high levels of consumer demand in the market. This is reflected in the huge volumes of traffic to Auto Trader over recent months, which last month was up 30% (64.6 million cross platform visits) when compared with October 2019. The time consumers spent researching their next car on the marketplace also increased, up 18.8% (a total of 9.9 million hours).
Another indicator of the huge demand in the market is the average number of views a car advertised on Auto Trader receives. Last month this average increased 35% when compared to October 2019. As a result, the average number of enquiries being sent to retailers also saw a significant increase, up 40%. What's more, based on the average number of days to sell, cars were selling 11% faster last month versus two years ago (24 days vs. 27).
In addition to the massive demand in the market, price growth has also been affected by ongoing new and used car supply challenges: according to the Auto Trader Market Insight tool, which is available for all retailers, supply was down -12.2% last month when compared to October 2019.
Whilst there may be some slight softening, it's the likely continuation of these dynamics – high demand and constrained supply – that will keep used car prices on a similar trajectory into next year. Richard Walker, Auto Trader's director of data and insights, explained:
"What we're currently seeing in the market is the result of basic economics - exceptionally strong consumer demand and a constrained supply chain which simply cannot catch up. Looking ahead, demand will continue to be fuelled by healthy levels of consumer confidence, a positive shift towards car ownership, and the 1.5 million 'lost' car sales in 2020. Add to the fact it's unlikely we'll see a strong return on supply levels due to the fall in new car sales volumes over recent years and the lower levels of pre-registration, we can expect strong year-on-year price growth to continue well into next year.
"Although we may see some slight week-on-week softening as a result of typical season trends, for year-on-year growth to slow to the low single digit levels we saw pre-pandemic, supply and demand levels will need to even out. From what we're seeing in the market, the wider economy, and the hundreds of thousands of daily price observations we're able to track across the live retail market, there's simply no evidence to suggest that will be anytime soon. One of the big learnings of the last 18 months, is in such a fast-moving market, it's vital retailers follow a data-led pricing strategy, even once these dynamics soften, to ensure they're securing the very best possible margin for their stock."
Internal combustion engine vehicles saw levels of supply fall further last month as global chip shortages in the new car market continued to constrain used car availability, with the number of used petrol and diesel cars in the market dropping -5.0% and -12.8% year-on-year respectively.
However, consumer demand remained positive for both fuel types, increasing 7.2% and 1.7% respectively. As a result, like-for-like prices for both used petrol and diesel cars performed positively in October, with the average price of a petrol car (£15,620) growing by 26.2% year-on-year (up from 21.7% in Sep-21) and the price of a diesel car (£16,880) growing by 26.7% (up from 22.7% in Sep-21).
The rising popularity of electric vehicles continued into October, with more people considering the switch from traditional fuel types. Indeed, demand for volume[i] brand and premium[ii] brand electric vehicles was considerably higher than the wider market, with interest growing 130.0% and 99.4% respectively. With demand outstripping supply, across both volume and premium brand EVs, prices in October increased 20.7% (£25,271) and 3.8% (£47,001) respectively.