Retailers missed out on nearly £25.5m in potential profit in March by pricing their stock below their true market value.
Auto Trader’s reported that nearly 7,700 of its circa 15,000 retailer partners advertised their cars below their current value with each retailer leaving an average of £3,300 in potential profits on the table as a result.
Its Retail Price Index found the average retail value of a used car was £17,712 in March, which on a like-for-like basis is up 2% year-on-year (YoY).
While used car prices have grown YoY for 36 consecutive months, the rate of growth has gradually eased since April 2022, when it had reached its peak of 32.2% YoY. March marked a reversal of this trend, however, rising from the 1.3% YoY recorded in February.
The acceleration in price growth, Auto Trader said, is the result of the ongoing challenges in used car supply (down -11% YoY in March), and the recent strengthening in consumer demand (up 12% YoY).
The growth in demand has translated into used car sales, which according to Auto Trader’s sales-proxy data grew circa 9% YoY in March.
It means sales in the first quarter of 2023 were up around 7% on the same period last year, but down nearly 5% on pre-pandemic levels due to the ongoing shortfall in younger cars.
Auto Trader’s data shows supply levels of 1–3-year-old and 3–5-year-old cars, were down -22.3% YoY and -25.4% YoY respectively last month.
Last month, used cars took an average of 26 days to leave retailers’ forecourts, two days faster than March 2022, and three days faster than 2019 levels.
Auto Trader’s director of data and insight, Richard Walker, said: “Given the stream of negative newspaper headlines, for many people the outlook for 2023 didn’t look promising. But against a backdrop of political and economic uncertainty, used car prices, and the market more broadly, has gone from strength-to-strength in Q1. It’s a very encouraging start to the year and these strong market indicators adds to our confident outlook for the months ahead.
“While other parts of the economy are subdued, the car industry is once again proving its resilience, but many retailers are inadvertently leaving profit potential on the table. To ensure businesses are securing the strongest margins possible, it’s vital they follow the data.”
Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), added: “As Q1 comes to a close, it’s a good opportunity to take stock of the current health of the market. It’s incredibly encouraging to see an acceleration in price growth and consumer engagement on Auto Trader. With the average retail value of used cars up 2% year-on-year, on a like-for-like basis, coupled with robust consumer appetite, dealers are confident that the strong levels of trading exhibited in the opening months of this year, will continue into Q2.”