Stock shortages are expected to trigger a 3% decline in used car sales during 2023, despite a 19% uplift in new car registrations, according to Auto Trader.

With an estimated 2.5 million new car registrations having already been ‘lost’ since the start of the pandemic, the automotive marketplace and market data provider asserted that the UK retail market would continue to be “dictated by supply, not demand” next year.

Despite cam manufacturer’s production challenges, however, Auto Trader’s forecast analysis predicts over 1.9 million new car registrations in 2023, which marks an 18% fall on pre-pandemic 2019 levels (and below the mid-term average of 2.4 million cars) but a positive 22% uptick on the 1.6m anticipated by the close of this year.

Auto Trader brand director Marc Palmer, who appeared on an episode of the AM News Show podcast earlier this year, said: “With so many different variables at play, predicting the direction of the market is never an easy task, and not one we take lightly. But as ever, we are led by the data.

“As we have found this year, the market performance has been dictated by supply, not demand.

“We have consistently seen on our marketplace, where there is stock there is strong demand, whether that be for new or used cars, a trend we fully anticipate continuing into 2023. And whilst the year ahead will be a demanding one, based on what we’re tracking across the market, we believe it is in a far stronger position than previous periods of economic turbulence.”

Society of Motor Manufacturers and Traders (SMMT) market forecasts suggest that 2022 could have the smallest car market since 1982, with 1.8 million expected for 2023.

November’s 23.5% increase in registrations means that this year’s volumes could surpass that earlier prediction – potentially reaching 1.6m.

Auto Trader commercial director Ian Plummer discussed the used car retail sector's trading outlook in another recent episode of the AM News Show.

Whatever the outcome of 2022, Auto Trader warns that the dearth of new-to-one and one–three-year-old cars in the market will impede used car transactions for some time.

It predicts the market will be in the range of 6.8-to-7.0 million in 2023, similar to its expectations for this year. 

But Auto Trader believes levels of car buying demand - and, as a result, dealer margins - will be partly shielded from economic pressures due to unique macro factors.

This includes the huge backlog of over 500,000 people waiting for a driving test, the current disruption in public transport cited by 50% of respondents in Auto Trader research as being a crucial factor to owning a car, and the combined five million lost new and used car sales which still leave a level of unsatisfied pent-up demand in a market.

What’s more, cars are, for most people, a fundamental need rather than a discretionary luxury, Auto Trader said. Its recent research showed more than three quarters (77%) of car buyers need a car to get around (up from 71% in pre-pandemic February 2020).

And with strong levels of employment (over 75%) projected to continue into 2023, it’s unlikely the car will be the first thing to cut.

“With these factors combine, robust levels of consumer demand should be sustained throughout 2023,” Auto Trader said.