Demand grows as prices tumble

Demand for used cars rose 11.7% in December while average values fell 5.6% to £17,064, according to Auto Trader’s Retail Price Index.

Data revealed that one to three-year-old cars saw a huge 35% rise due to the 16.1% increase in demand far outpacing the 14.3% fall in supply, while the three to five-year-old category was the second strongest performer, up 19.3%.

The market only softened in two groups, the five to 10-year-old category which fell -0.4%, and the 10-15-year-old category, which was down 7.4%.

Growth was recorded across all fuel types, although electric vehicles were the outstanding performer in December as a massive 103.2% rise in demand far exceeded a 7.2% rise in supply, propelled by the recent fall in prices.

Director of data and insights, Richard Walker, said: “Our data clearly shows that the fundamentals of the used car market remain solid; consumer demand is robust, and cars are selling quickly, which combined with the slow return in supply, means retail prices continue to show more resilience than trade.

“Worryingly, it appears some pricing strategies are being guided by wholesale trends, placing pressure on retail values, and risking profits in the process. Rather than just a cause for concern, the retail and wholesale markets being out of sync also presents a profit opportunity for retailers who analyse the data on a car-by-car basis and price stock relative to retail valuations. More than ever, it’s crucial retailers adopt a forensic-like approach to their pricing strategies this year.”