Almost 1.8million used cars changed hands in the first three months of 2022, a year-on-year rise of 5 per cent, according to figures published this morning.
Demand for second-hand motors remains exceptionally high because of restricted new car production linked to the global semiconductor shortage and ongoing supply crunch that has been hammering the sector for two years.
Growing waiting lists for new motors has sparked an increased appetite for the used car market, which has triggered values of second-hand vehicles to skyrocket, with the average price almost a third above what it was just 12 months ago.
Used car demand still going strong: Sales of second-hand motors were up 5% year-on-year in the opening three months of the year, according to new data from the automotive trade body
Some 1,774,351 second-hand car transactions took place in January, February and March, the Society of Motor Manufacturers and Traders said on Tuesday.
An additional 86,596 cars changed hands compared with the same period a year ago, though it should be noted that showrooms nationwide were closed for much of the first quarter of 2021 due to pandemic-related lockdowns and only ‘click and collect’ sales were allowed.
Despite growth over the first three months of the year, used motor transactions remain 12.2 per cent below the pre-pandemic year of 2019.
However, electric cars bucked the trend with another record quarter.
Sales of used pure electric vehicles more than doubled from 6,625 to 14,586 – a rise of 120.2 per cent – though they still only made up 3.6 per cent of all transactions.
Jamie Hamilton, automotive director and head of electric vehicles at Deloitte, said that for early EV adopters, these figures ‘should instill confidence in their vehicle’s residual value which, eventually, also filters through into more attractive financing deals for new car sales and fleet renewal’.
Plug-in hybrids and conventional hybrid cars also changed hands in greater numbers than the year before, rising by 35.3 per cent and 28.8 per cent respectively, but petrols and diesels still account for more than 19 in 20 second-hand motor sales.
The growth of the used market is a total contrast to the new car sector, with registrations down 34.1 per cent over the same period as vehicle production continue to be restricted by a shortage of semiconductors and wider supply issues.
Mike Hawes, chief executive at the SMMT, said the growth in the used car market ‘is welcome’ in light of the ongoing supply crunch strangling manufacturers, but said it was ‘unsurprising given we were in lockdown last year’.
Richard Peberdy, head of automotive at KPMG, added: ‘The increasing cost of living is cooling the used car market slightly, but demand still remains high and is likely to continue to until the issues impacting new car production are resolved and more supply enters the used car market. That is unlikely to be this year.’
The average price of a used car in April was £17,418 – that’s almost a third higher than the same month of 2021, says Auto Trader
Have record second-hand car prices hit a ceiling?
Latest data from the Auto Trader claims that average used car values in April were 32.2 per cent higher than a year ago, marking a 25th consecutive month of rising prices.
The average price of a used car in April was £17,418, based on the advertised prices of around 900,000 vehicles listed on the website.
However, it says it is beginning to see signs of growth levelling off, with only a marginal increase on the 32 per cent year-on-year rise in March, which could be a signal of the market hitting the ceiling.
It said the slight deceleration in average used prices ‘is the result of a number of factors, not least the fact that growth is now overlapping last year’s already very strong levels’.
The second-hand car marketplace added that softening consumer demand fuelled by the cost of living crisis has also had an impact on the market, which in turn has seen values soften as dealers look to attract customers.
But while record second-hand prices might possibly be flat-lining, Auto Trader says there is no indication in the data that prices will go into reverse.
This is because the semiconductor shortage – which triggered used car values to surge – continues to impact manufacturers, who are now being constrained by additional issues, not least the supply of components from Russia and Ukraine and the slowdown in the Asian market.
Commenting on April’s performance, Richard Walker, Auto Trader’s director of data and insights, said: ‘Clearly there’s potential economic headwinds to consumer demand, but from what we’re seeing, there’s still robust levels of appetite for both new and used cars in the market.
‘Add to the fact that the ongoing squeeze in new car supply is likely to be extended, due in part to the current geo-political situation, we’re confident used car prices will remain strong for quite some time to come.’
He adds that while younger cars – which would normally enter the used market at the end of a lease or finance deal – have been heavily impacted by the downturn for the new car sector, there has been strong appetite for older cars, particularly those between five and ten years old – where stock is much less of an issue.
‘Sales in this segment were up a huge 20 per cent on 2019,’ according to Auto Trader’s own data.
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