Average used car prices on Auto Trader have increased for the fifth consecutive month to £13,705 - up by a record 6.1% in August year-on-year.
The latest data from Auto Trader’s Retail Price Index, which is based on pricing analysis of around 900,000 vehicles every month, showed that August saw the steepest month-on-month increase in rate of growth since the Index began, leaping from 4.6% in July.
Auto Trader said average prices in August were affected by a number of different factors, including the mix of stock within the market.
Last month there were fewer diesels, automatics and cars aged under one year old in the market, which as a result meant price growth was in fact slowed down by a decline in these more expensive segments.
While supply challenges remain for many retailers, demand continues to grow at record levels.
On Auto Trader, the traffic seen throughout June (64 million) and July (64.4 million) has accelerated in August to 67.1 million cross platform visits to its marketplace: a year-on-year increase of 30.5%.
Diesel sees record growth, while EV decline continues
Internal combustion engine (ICE) vehicles continued to record strong rates of price growth in August.
Demand for petrol cars increased 27.4% YoY last month, while supply was down -3.6%.
As a result, the average sticker price for a used petrol car increased 6.8% (£12,389) in August, the ninth month of consecutive growth.
Diesel recorded a similarly positive performance.
However, while demand was up 19.3% YoY, supply of second-hand diesels in the market fell a significant -20.3% in August.
It contributed to a 6% YoY (£14,572) price increase, the highest ever rate of growth for second-hand diesel cars recorded on Auto Trader’s Retail Price Index.
In contrast to their ICE counterparts, since the beginning of the lockdown period demand for low emission vehicles has fallen below levels of supply.
Auto Trader said this suggests car buyers are reverting to the type of vehicles they are familiar with, and what they consider to be the most affordable choice, namely petrol and diesel cars.
In August, the average price of an EV was £25,880, a -5.2% decline on the same period last year, and the highest rate of contraction since November 2015.
Alternatively fuelled vehicles (AFV) more broadly fared slightly better, with average prices declining -1.1% (£22,362); the sixth consecutive month of price contraction.
SUVs record highest rate of demand
In terms of body types, while hatchbacks saw the highest average price increase (10.7%) last month, SUVs continue to record the highest level of demand at 37% YoY.
However, they recorded the lowest rate of price increases at 2.9%, which is due in part to the high level of supply.
Last month, SUVs represented 27% (87,348) of total supply into the market.
In August every age band of used car recorded an average price increase.
Vehicles aged 10-15 years saw the highest rate of growth, surging 13.4% (£4,281). In contrast, vehicles aged one to three years old saw the lowest rate of growth at 3.9% (£18,684).
Both premium and volume brands saw average prices grow in August, increasing 3.9% (£20,710) and 11.5% (£9,065) respectively.
While demand outstripped supply in both segments, premium brands continue to show stronger performance compared to volume brands, increasing 27% versus 23%.
Richard Walker, Auto Trader’s director of data and insight, said: “Over the last five months we’ve observed a very positive trajectory for used car prices, driven largely by supply challenges and extremely strong consumer led demand.
“Although some of the supply constraints had begun to ease with the reopening of online auctions, many of our customers are reporting that they continue to face difficulty in sourcing wholesale stock.
“Combined with the massive acceleration in demand on our marketplace, whilst the trajectory may begin to level off slightly, we’re confident prices will remain buoyant over the coming months.”
Walker said it was reassuring to see demand in the market as retailers enter into what will be a key month for the automotive industry’s recovery.
Retailer pricing behaviour
During the lockdown period Auto Trader data showed the number of retailers making price changes and the value of price adjustments was significantly lower than normal trading conditions.
This has increased following the reopening of showrooms in June; however, it remains below pre-COVID-19 levels.
In August, the average number of retailers making daily price changes was 1,982; 17% fewer than in August 2019. The average amount being changed on a daily basis was £263, which was 28% decline on the same time last year.
Sue Robinson, director of the National Franchised Dealers Association (NFDA), said: “Used car prices are benefiting from strong consumer demand alongside supply challenges.
“Demand for internal combustion engine cars continues to be buoyant in the used sector, which is reflected in the average price increase for petrol and diesel vehicles.
“We expect appetite for used cars to remain robust over the coming weeks thanks to a number of factors including the movement away from public transport to owned vehicles and the increase in disposable income for a number of consumers.”