Shortage of used vehicles increasing age and mileage of stock

The average age of wholesale vehicles in August 2022 was more than 104 months compared to just in excess of 96 months in August 2019, according to Manheim.

The average mileage, meanwhile, which dropped in August 2020 and 2021, was 70,000 in August 2022, similar to that of August 2019.

However, both increases in mileage and age have not diminished average wholesale prices, which are at a three-year high of £7,283 compared with £6,519 recorded last year.

Cox Automotive says that the leasing sector finds itself in a familiar situation to previous months, with contract extensions and older, higher mileage vehicles being de-fleeted and funnelled into the wholesale market.

Some positive signs can be found in new car markets across Europe, which finally returned to year-on-year growth in August. However, markets remain significantly below pre-pandemic levels.

Last month, Germany registered a 3% YOY increase, as did France (+3.8%), Italy (10.1%) and Spain (9.1%).

However, a YOY comparison with 2019 figures is less favourable, with Germany (-36.5%), France (-29.3%), Italy (-20.2%) and Spain (-30.3%) all significantly below numbers recorded before the pandemic.

Used car sales activity across key European markets also slowed, resulting in a month-on-month decline in sales volumes across Germany (-7.2%), Spain (-12.1%) and Italy (-8.1%).

The UK shares many similarities with Europe’s new car markets, says Cox Automotive. New car registrations reached 68,858 in August, a 1.2% YOY increase (-25.6% on 2019), amid further signs of market stabilisation, while private sales totalled 34,900.

However, the impact of supply chain shortages continues to be felt within new vehicle production, in contrast to the used vehicle market, which enjoys relative stability, with only marginal fluctuations stemming from ongoing supply and demand dynamics.

Philip Nothard, insight and strategy director at Cox Automotive, said: “Automotive businesses must keep an eye on the horizon to navigate potential storms.

“With consumer confidence affected by the rising cost of living in the UK, coupled with political changes at the top of government and expected economic struggles on the way, the sector faces a potentially tricky time in the coming months.”

The latest key indicators on Cox Automotive’s Data Dashboard reflect the impact of the ongoing shortage of used vehicles, with marginal increases in average age and mileage and the supply and demand imbalance remains as it has for some time.

In addition, first-time conversions for cars and LCVs remain positive as retailers focus on keeping their forecourts full. However, although the September plate change created those much-needed used vehicles, it won't be enough to cause significant oversupply for some time, suggests Nothard.

“The key is understanding the variance between supply levels down to a model and derivative level,” he said. “Alongside this is the understanding that we are no longer in a period of heavy demand as we were in 2021.

“Therefore, it is ever more critical to ensure vehicles are advertised with strong imagery and descriptions and that vehicles entering the wholesale market are appraised and valued accordingly.”

Demand for used EVs gathers pace

In Indicata’s latest market report, it says that sales of used electric vehicle (EVs) gathered pace again in August despite a softening of the overall UK market.

Sales were up 53.3% year-on-year from July but a shortage of the right type of stock continues to prevent sales growing even further.

Despite the EV sales growth dealer stock turn fell in August due to a shortage while some buyers have delayed a move to zero emissions while the cost of living continues to rise.

Hybrids are a lower emissions alternative and sales rose during August with the supply of used stock benefitting from strong new car registrations prior to the start of the pandemic, it said.

Overall used market stock levels fell by 6.4% between early August and September but remain 8% higher than for the same period in 2022.

UK price inflation fell by 0.3% and remains the only European market to experience a fall in used car prices in 2022 by a total of -3.6%. Prices have fallen for eight consecutive months although there are early signs prices are starting to slow down in mainland Europe.

“The used market is at a crossroads currently as the summer holidays are over and the trade is waiting to gauge consumer demand in the run up to Christmas,” said Jon Mitchell, Indicata UK’s group sales director.

“The restricted used car stocks and new car supplies are not going to change anytime soon. Dealers will need to be in tune with the used market on a daily basis to see how it shapes up over the coming months.”

Reviewing Indicata’s top-selling used car table the Ford Fiesta remains in first place followed by the VW Golf and the Nissan Qashqai, while the top three fastest-selling used cars changed yet again in August.

Skoda’s Kodiaq took the top spot, followed closely by the Lexus CT while the Toyota C-HR fell to third place from last month’s second spot.

Used car volumes rise at BCA in August

Average monthly used car values at BCA slipped back in August 2022, principally driven by a changing model mix through the online auction channel.

Values averaged £8,954 across the board at BCA in August, down from £9,464 the previous month, with performance against guide values down marginally on July at 97.3%. 

Encouragingly, says BCA, sold volumes rose to their highest point since March 2022, despite August traditionally being one of the quieter months for used car sales.

Demand improved during the month and whilst the better condition vehicles generated significant interest, buyers started to shift their attention towards lower grade and higher mileage vehicles.  

Drilling down into the year-on-year weekly figures, it can be seen that used car values began their rapid acceleration 12 months ago, eventually reaching the highest average values on record later in September 2021.

BCA UK’s chief operating officer, Stuart Pearson, said: “Given the ongoing concerns around the cost of living, inflation and interest rates, political uncertainty and the ongoing war in the Ukraine, trends in the used car market were relatively positive in August.

“Sold volumes increased at BCA in August and while average values came under some pressure, this was largely a result of the change in model mix that is typical at this time of year. 

“Seasonality has made a return in 2022 and trading activity across the wider used car market has settled down to more familiar patterns as the constraints imposed by the pandemic have receded.”

Pearson added: “That said, the ongoing shortage of ex-lease, rental and OEM stock is likely to remain a challenge for the wholesale used vehicle sector for some time to come. 

“But even here, the SMMT’s August report noted the first upswing in new car volumes for many months – a modest 1.2% rise - so perhaps we are starting to see the very earliest green shoots of recovery in the new vehicle sector?”