Used car sales contracted nearly a fifth in the second quarter of 2022, with 407,820 fewer used cars switching hands between April and June than a year earlier, the latest industry figures show.
Business leaders have been quick to suggest that this is not the result of cost-of-living cuts, but “an inevitable knock-on effect” of fewer new models hitting the market.
However, with used car values still near record highs and no signs of a rapid decline, others say pressures on disposable income have led drivers to decide to keep their existing cars longer.
Not enough used cars to sell: The SMMT says an 18.8% drop in second-quarter transactions was an ‘inevitable knock-on effect’ from ‘pressure on new car supply’ as dealers run out of inventory have more
The British used car market shrank by 18.8 percent in the second quarter of 2022, according to results from the Society of Motor Manufacturers and Traders.
In the three-month period, some 1,759,684 used motorcycles changed hands, 407,820 less than last year.
In the quarter, declines were recorded in each month, with declines in April, May and June of 16.8 percent, 20.9 percent and 18.6 percent, respectively.
As a result, the market for the first half is down 8.3 percent from 2021 and 12.8 percent below the first six months of pre-pandemic 2019.
The SMMT says the drop in transactions shouldn’t be attributed to belt-tightening drivers, but to a knock-on effect of issues that have strangled the new car market over the past two years.
The ongoing shortage of semiconductor chips has severely curtailed vehicle production since the pandemic — and is now beginning to affect the second-hand market, the industry association says.
Mike Hawes, chief executive at the SMMT, said it was “inevitable that pressure on new car supply would trickle down to the used market.”
Sue Robinson, chief executive of the National Franchised Dealers Association, added: “Current volumes of new cars are limiting the number of trade-in vehicles entering the market that would normally help to supply dealers’ gas stations, while at the same time some consumers have a car quickly. required. are turning to the used car market to buy their next vehicle.”
The SMMT confirmed declines were recorded in each month of the quarter, with declines in April, May and June of 16.8%, 20.9% and 18.6% respectively.
Ian Plummer, director of Auto Trader, the UK’s largest used car marketplace, says it has also seen a decline in used car availability in recent months.
“Given the mounting pressure on consumer finances, it would be tempting to attribute declining second-quarter sales of second-hand cars to dwindling demand, but in reality the market is reeling from a blow to the basic economy – there just aren’t enough cars. to sell,” he explained.
Due to the double whammy of forecourt closures and a shortage of microchips, nearly two million new cars have been ‘lost’ over the course of the pandemic, resulting in a significant shortage of younger cars re-entering the market for sale. .
“Despite the economic uncertainty surrounding the rising cost of living, rising fuel prices and the latest interest rate hike, our data provides a stable outlook for the used car market for now.
“In fact, the lack of availability coupled with the overflowing order books for new cars – and the very long wait times – keeps demand for used cars high.”
AutoTrader says it expects used car prices to “stay exceptionally strong” for the rest of the year.
“Anyone who predicts an impending crash in retail prices will be very disappointed,” Plummer added.
Industry insiders say used car demand remains high despite the drop in sales in the second quarter, meaning average prices are likely to remain high
Chris Knight, UK automotive partner at analyst KPMG, endorsed Mr Plummer’s prediction that used car values will remain strong: “Consumer demand for used cars may decline in the coming months, but the supply landscape is such that it is unlikely is that we see large price corrections in the near term.’
However, not everyone agrees.
The online used vehicle marketplace, Heycar, says it tracks the average value of three- and five-year-old cars advertised on its website and that prices fell last month.
The average asking price of a three-year-old car in July was £19,900, which is 0.6 percent lower than in June and 8.2 percent lower than in January.
The Ford Fiesta remains the UK’s most popular used car
Older used cars have seen a bigger drop, with the average asking price of a five-year-old car being £15,947 in July, 11.5 per cent lower than at the start of 2022.
“These are indications that the cost of living crisis is having a greater impact on car buying behaviour, resulting in a decline in demand,” said Heycar consumer editor Sarah Tooze.
While used car sales as a whole contracted in the second quarter, there was an increase in used electric car transactions.
Pure EV sales grew 57.1 percent in the second quarter to 16,782, while plug-in hybrids remained stable at 1 percent.
This is likely due to increased availability on the market, with makers prioritizing production of EVs in recent months as they strive to meet the strict emissions targets imposed by the EU.
Still, AutoTrader believes the surge in used electric car demand could be linked to fuel prices soaring to record levels from April to June.
The Ford Fiesta was the most popular used car purchase in the second quarter with 71,429 changing owners, followed by the Vauxhall Corsa (57,306) and Volkswagen Golf (54,268).
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