Car Dealer News: The Used Car Retail Price Index, reported by Auto Trader, shows a slight easing in the rise of used car retail prices in July. The increase in prices was 3.2% year on year in June, but it has now reduced to 2.8% in July. Despite the slowdown, the current average price of a used car stands at £17,975, representing a 0.3% month-on-month increase on average.

However, this headline figure masks substantial growth rates within specific categories. Older cars, in particular, have seen a significant surge in prices due to strong market health dynamics. For instance, the current average retail value of a second-hand car over 15 years old is £5,805, marking an 8.7% increase from July 2022 and a 2.6% increase from last month.

Similarly, the average price of cars aged 10 to 15 years (£6,634) witnessed a 1.4% month-on-month increase and an impressive 11.1% year-on-year rise. This is in addition to the remarkable 26.5% year-on-year growth recorded in July 2022.

The rapid price increase can be attributed partly to supply pressures surpassing robust consumer demand. The current levels of demand are up 19% year on year, while the availability of stock has only risen by 7% year on year. This discrepancy between demand and supply is leading to significant price growth, especially in the older age bands, which is a consequence of the 2008 financial crisis when new car volumes were slow to enter the retail market.

Interestingly, the only age band to experience a contraction in value this month is vehicles aged one to three years, with an average retail price of £27,003, a 2% decline from last year. This decrease is primarily due to the declining value of low-emission vehicles, which has dragged down the average values for this age group of cars. While petrol and diesel cars aged one to three years have seen a 3% year-on-year increase, their plug-in hybrid and electric counterparts have suffered declines of 15% and 24%, respectively.

This disparity between traditionally fueled and alternatively fueled cars is consistent with trends in the wider retail market. EV retail prices across all ages are still contracting on a year-on-year basis. The current values of electric vehicles, at £31,622, have dropped by 20.7% compared to last year. In contrast, the average retail price of used petrol (£16,519) and diesel (£16,570) cars across all age groups is up 5.2% and 5.1% year on year, respectively.

July saw the lowest level of month-on-month contraction since August 2022, standing at just 0.1%. This marks a significant improvement compared to the 0.9% month-on-month contraction in June, 1.5% in May, and 1.6% in April. This improvement can be attributed to slowing levels of supply into the market as retailers sell through available cars.

As the supply and demand dynamics continue to improve and retailers find attractive price points to meet increased supply, electric vehicles are leaving forecourts at a much faster pace. Currently, EVs are selling at a speed on par with petrol cars, with an average time of just 30 days, making them the joint-fastest selling fuel type. This marks the fastest speed of sale for electric vehicles in nine months.

Richard Walker, Auto Trader's director of data and insight, remains optimistic about the used car market. He noted that although retail price growth has slightly slowed, it does not indicate a reversal in the market. Buoyant demand, combined with constraints on new and used car supply, will likely maintain stable retail values. While increasing used car prices may add pressure on motorists, those looking to sell or exchange their vehicles should be insulated as the value of cars on driveways is also rising considerably.

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