The used car market in the UK is known for its fluctuations, but this August, something unusual happened. Despite the seasonal dip that typically follows summer’s peak, used car prices defied expectations.
Why are Used Car Prices Performing Well in August 2024?
Traditionally, the used car market slows down in August. Families head off on holiday, the weather brightens, and the demand for vehicles generally cools. However, this year has slightly flipped that narrative. Prices for used cars performed better than expected, with a marginal month-on-month decline of just -0.1%.
Petrol cars remain in high demand, as supply has contracted significantly, pushing their prices slightly higher. On the other hand, electric vehicles (EVs), despite seeing a rise in demand, have experienced a slight softening in prices due to a substantial increase in supply.
Limited Supply and High Demand
One of the primary reasons for the price increase is the simple issue of supply and demand. Over recent years, the supply of new cars has been disrupted by factors ranging from semiconductor shortages to the lingering effects of the pandemic. This reduction in new car availability has pushed more buyers towards the used market, driving up prices.
As the government’s 2030 ban on the sale of new petrol and diesel cars looms closer, drivers are increasingly looking to switch to electric vehicles. With the availability of quality used electric vehicles higher than before, for some, it’s a good time to take the jump.
Petrol Cars vs Electric Vehicles: Who’s Winning?
Despite all the buzz around electrification, petrol cars continue to dominate the used market. Why? It comes down to infrastructure and cost. While expanding, the UK’s charging network isn’t quite ready for the mainstream. Many drivers, particularly those in rural areas without home charging, hesitate to switch to electric vehicles.
That said, electric vehicles are slowly gaining ground. Auto Trader’s analysis highlighted that used EVs are selling faster than before as buyers who are environmentally conscious or looking to future-proof their vehicle choice start to enter the market. With EV prices typically higher than their petrol counterparts, this shift also contributes to the upward trend in used car prices.
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Auto Trader’s Market Health Index
One key indicator for understanding the state of the used car market is Auto Trader’s Market Health Index. This metric measures supply versus demand across various car segments, providing a clear market snapshot. According to the latest data, August saw an unexpectedly strong performance, with demand exceeding seasonal expectations.
For buyers, this can be a double-edged sword. On the one hand, it means the market is robust, with plenty of buyers eager to snap up available stock. On the other hand, it means prices are higher than usual, making it more challenging to find a bargain.
What Does This Mean for Buyers and Sellers?
If you’re in the market to buy a used car, particularly a petrol, you’ll need to be prepared for higher prices. The silver lining is that the higher demand means you’ll likely get a good deal if you want to sell or trade in your current vehicle. As always, timing is critical, and given the current market conditions, waiting for prices to drop may not be the best strategy.
This offers sellers a prime opportunity to capitalise on a high-demand market. However, it’s essential to ensure that your vehicle is competitively priced and marketed well. With some research, buyers and sellers can gain valuable insights into the best time to enter the market.
Looking Ahead: Will Prices Continue to Rise?
The big question is whether the positive outlook for the used car sales market is here to stay. While August 2024 saw a significant price rise, it’s difficult to predict if this trend will continue. The used car market is notoriously hard to forecast, and factors such as new car production levels, economic conditions, and changing consumer preferences will all play a role.
With supply issues persisting and the push for electric vehicles gaining momentum, it wouldn’t be surprising to see used car prices remain higher than usual for the foreseeable future.
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