Positive outlook for used car market

The used car market is expected to perform well in the second-half of the year, with sales predicted to rise 5% year-on-year to 7.6 million transactions, according to Auto Trader.

Despite challenging market conditions, including the squeeze on supply, particularly among 1-5-year-old vehicles which saw levels fall by around 16% over the past six months, Auto Trader estimates used car sales increased by 5% year-on-year in the first half of the year.

This was fuelled by strong levels of consumer demand, which in June saw the biggest rise on Auto Trader in 15 months. It was also reflected in the average 84.4 million visits to Auto Trader each month (up 9% year-on-year) over the period, as well as the increased pace in which used cars sold. In July, cars were selling five days faster than in July 2023.  

With no immediate sign of a significant drop in demand or consumer confidence, which in June reached its highest level since November 2021, boosted by the stable economic backdrop (including the softening in inflation), Auto Trader believes the market is on course to record an additional circa 350,000 used car sales this year, representing a year-on-year rise of around 5%.

However, with the number of sub-five-year-old cars on the road by the end of 2024 set to be at their lowest since 1995, current supply complexities are set to deepen, says Auto Trader.

Highlighting the huge impact the shortfall of new cars built and sold over the course of the pandemic has had on stock flow, this year there will be 28% fewer cars under five years old in the parc compared to 2019.

Looking at the data at a more granular level reveals that the scale of the loss has not been spread equally across all manufacturers, with three main factors impacting volumes.

Firstly, in the two main periods of disruption in factory production, some brands were better insulated from plant closures and parts shortages, which enabled them to resume or maintain production faster than others.

Next, there are some brands for which sales volumes were already in decline, a trend accelerated by the pandemic’s supply issues and volume has not recovered to previous levels.

Indeed, some brands will have around half the number of sub-five-year-old cars on the road by the end of 2024, including Vauxhall, Ford, and Mercedes-Benz, which will have 56% (560,000 cars), 54% (730,000), and 42% (310,000) fewer cars of that age cohort in the parc respectively.

Finally, a much smaller handful have seen volumes of this age cohort increase over the period due to more sales: 2024 will close with seven times more sub-five-year-old MGs and Teslas on the road compared to 2019, and 9% more Kias.

This disruption in stock dynamics will have ranging implications for retailers, says Auto Trader, not least the need to source older vehicles (requiring more preparation), as well as increased competition for stock.

In 2019, 5-10-year-old cars accounted for just 13% of a franchise retailers’ forecourt; today it’s nearly a quarter (22%).

For supermarkets, the shift is even more profound, rising from around just 1 in 10, to nearly a third.

Compounding the challenge, says Auto Trader, is the huge surge in electric vehicles entering the parc.

By the end of this year, it estimates around 4% of the cars on the road will be an EV, compared to 88% ICE.

By 2033, that number will have risen to over a third, whilst the proportion of petrol and diesel will have shrunk to around half.

As a result, there will never be more sub-five-year-old petrol or diesel cars on the road than there are today, with the returning supply increasingly electric.

By 2028 around a third (33%) of all under five-year-old used cars in the parc will be electric, up from around 15% by the end of 2024.

Marc Palmer, head of strategy and insights at Auto Trader, explained: “2024 has had its challenges, but overall, it’s performed well, and based on the current trajectory our outlook for the rest of the year remains positive.

“However, the heavily nuanced market retailers have had to manage over the last few years is only set to intensify, as the combination of supply constraints, more electric cars, and a changing brand landscape mean the parc will soon look very different.

“With such a dramatic change in forecourt dynamics, sourcing, pricing and selling cars are going to require a blend of both instincts and insights to navigate the market ahead.”  

To help retailers plan, prepare and navigate the future market, Auto Trader has published interactive analysis on the future of the car parc, including a full breakdown by fuel-type, age cohort, and brand.