Used car prices rocket as UK inflation rate reaches record high

As the latest figures reveal inflation hit its highest rate in a decade last month, based on data from the Auto Trader marketplace the record levels of used car price growth shows no sign of easing, with average prices increasing a massive 26.9% last week on a year-on-year (YoY) and like-for-like basis.

To see what the latest inflation figures mean for UK businesses, view Business Leader’s analysis here.

It marks the 80th consecutive week of price growth, and an almost four-fold increase in just six months, rising from a now relatively conservative 6.8% in May 2021.

This recent acceleration has been fuelled by the massive levels of consumer demand in the market, which as highlighted on Auto Trader’s Market Insight tool, was up 14% last week when compared to the same period in 2019. This is further reflected in the continued growth in cross platform visits to Auto Trader, which last week increased 27% (over 14 million visits) on the same period two years ago. There was also a 14% rise in the hours (2.1 million) consumers spent researching their next car on its marketplace.

Further evidence of this exceptional demand is the faster speed at which retailers are selling cars. Last week it took an average of just 27 days for stock to leave forecourts. Although it’s a slight slow-down on the October average of 24, which is a typical season trend, it’s 16% faster than the speed of sale recorded in 2019 (32).

Another factor in the surge in prices is the ongoing drop in levels of supply, which were down -8% last week versus 2019. The shortage of micro-chips and other raw materials which is directly and dramatically impacting worldwide supply of new cars is having a significant knock-on effect on the remarketing supply of used cars.

Consumer sentiment survey points to sustained demand

Despite current inflation rates, the latest findings from Auto Trader’s consumer sentiment survey, conducted in October, suggest a minimal impact on buying intentions. Out of circa 1,100 car buyers, 22% intend to purchase within the next three months, whilst 43% intend to do so within two weeks, which is up from 41% in September. What’s more, 31% of those surveyed believe car ownership is more important today than it was pre-COVID, whilst 44% feel more confident in their ability to afford their next car than they did a year ago.

These positive indicators, along with wider economic influences, support Auto Trader’s prediction that the market will record a total of circa 7.75 million used car sales this year.

Auto Trader’s Data and Insights Director, Richard Walker, said: “To see such a huge increase in car prices in such a short period of time is truly remarkable and is indicative of the current perfect storm of exceptionally high levels of consumer demand coupled with very constrained new and used supply channels. We’re also comparing against a period of national lockdown last year, which will further contribute to the high level of growth we’re seeing.

“Although inflation will always pose a threat to demand, based on the positive consumer metrics we’re tracking across the retail market, as well as broader economic factors such as the record number of job vacancies reported just this week, we don’t anticipate any significant easing beyond normal seasonal trends. Accordingly, with such strong levels of demand, and no end in sight for the current supply challenges, we can expect the strong year-on-year price growth to continue well into next year.”