'Significant discounts' predicted for new car market in 2024

As manufacturers face a challenging combination of slowing retail sales, new regulatory targets, and increased competition from new entrants, significant discounting is being predicted by AutoTrader.

The new car market is set to return to a ‘push’ model in 2024, it says, with finance offers alongside discounting being used to stimulate consumer demand – particularly for electric models.

As a result, it expects a 4% growth in new car sales, from an estimated 1.89 million in 2023, to circa 1.97 million in 2024. 

Used car market to increase in 2024

Auto Trader is also predicting robust used car demand will continue in 2024 and result in a small market uplift.

It forecasts transactions will increase to an estimated 7.24 million sales, up from the 7.17 forecast for this year.

Potential market growth will continue to be hampered by the 3 million ‘lost’ cars that weren’t sold between 20220 and 2022.

Although it began to slowly return this year, current stock levels on Auto Trader are up just 2% on December 2022, and with significant variations across different market segments.

Indeed, the volume of cars aged up to a year old has increased 32.2% over the same period (albeit down circa 50% on 2019’s levels), whilst those aged 1-3 and 3-5 have fallen by 10.5% and 7.3%, respectively.

Auto Trader’s commercial director, Ian Plummer, said: “We’ve seen record breaking levels of engagement on our marketplace in 2023, both new and used sales have increased, and with car buyer sentiment remaining positive, we’re hopeful for another robust year for demand and overall transactions.

“Whilst there’s no doubt that 2024 will have its challenges, the used car market will be starting the New Year with some momentum behind it.”

He added: “Coupled with increased competition from new entrants vying for UK market share, next year’s looking very attractive for car buyers wanting to make the electric switch.”

No crash in sight for used car prices

Although supply is returning, albeit slowly and inconsistently, it’s being outpaced by consumer demand, which according to Auto Trader’s data, is currently up 10.7% on December 2022.

As a result of this imbalance, Auto Trader’s Market Health metric is up 8.5%, the highest rate since July. The strong market health is reflected in both the speed in which used cars are selling (32 days in November consistent with this time of year) and the increase in used transactions, which were up 4.7% year-to-date at the end of Q3 and have since continued at a similar pace (up circa 5%YoY in November).

Crucially, says Auto Trader, it is helping to stabilise the recent softening in used car retail prices, which at the December mid-month point (£17,304) are down 3.9% on a year-on-year and like-for-like basis.

This is marginally lower than the 3.8% year-on-year drop recorded in November, and on a month-on-month basis, is down just 0.6% which is in line with typical seasonal trends.

Traditionally, as more buyers come into the market after the festive lull, retail prices pick back up at the beginning of the New Year, which should be a key consideration for retailers as they plan their Q1 forecourt strategy.

As a result of the 3 million cars missing from 2020-22, supply constraints will continue to flow through the market for years to come, and with Auto Trader’s consumer sentiment metrics pointing to sustained levels of consumer demand (78% of people plan to buy in the next six months, and eight in 10 claim to be feeling at least as confident as last year in their ability to afford their next car) there are no reasons why used car retail prices should drop significantly anytime soon, it says.

Data will be a vital currency in 2024

Despite the underlying health of the market, Auto Trader says that there has been a recent increase in unnecessary re-pricing activity, likely the result of wholesale trends.

In fact, there are currently more than 47,000 used cars being advertised by around 8,000 retailers on Auto Trader that are priced under their true market value, equating to over £32.7 million in missed profits: over £4,000 per retailer.

This, it says, highlights that, with such nuance in the market, accurate and immediate data will be vital in 2024 to identify opportunities, safeguard risk, and secure profit.

Plummer continued: “Forecasting the direction of the market and future trends is challenging, but as always, we are guided by the data, as should retailers.

“I’ve no doubt that accurate and immediate data will be a vital currency in 2024 to navigate what will be a more complex retail landscape.

“With such nuance and variation across segments in the used car market, rather than a broad-brush strategy, an almost forensic car-by-car approach will be essential to identify and secure the opportunities we expect for the year ahead.”