In 2021, the country's second-hand car consumer price index reached 2012 levels after a consistent decrease between 2010 and 2019. The country's general cost of living crisis prompted around 73 percent of new and used car buyers to consider changing their car purchase intentions, with 30.4 percent considering buying a cheaper car. While used cars are typically considered a more affordable option for consumers, their average price at independent dealers, franchised dealerships, and car supermarkets has increased. These economic factors and their impact on consumer behavior acutely affect the UK used vehicle market—More used cars were bought on finance by consumers between October 2021 and September 2022 than between October 2020 and September 2021.
The used car market brings on new challenges
The UK used car market is dominated by internal combustion engine (ICE) vehicles. In 2021, around 4.23 million used vehicles sold were petrol cars, while 3.05 million were diesel cars. This year, the Ford Fiesta was the best-selling used car model in the country, with over 326,400 units sold. The American brand is the used vehicle market leader in the UK but did not match up to the new car market, where European brands such as Volkswagen and Audi held the largest share of sales.However, while the used vehicle market differed from the new vehicle sector, it also presented one important similarity, namly petrol-based propulsion engines (ICE). Petrol cars held 46.3 percent of the new passenger car market, making ICE vehicles the best-selling propulsion type in the industry. While ICE vehicles were the market leaders, alternative fuel vehicles gained popularity among new car buyers. In 2021, battery electric vehicles represented around 11.6 percent of new sales, and this interest was expected to follow in the used car market, partly influenced by rising motor fuel prices. However, under two percent of the available used car stock at dealerships in October 2022 were electric vehicles, suggesting potential supply issues due to the relatively emerging nature of the used EV market.
Dealerships struggle to recover from the crisis
Despite these segment-specific setbacks, the monthly used vehicle supply increased year-over-year between May and October 2022. While this did not offset the drop in supply recorded in 2021, this supply growth benefitted partly from a decrease in used car demand throughout 2022 due to the soaring living costs in the country. On September 11, 2022, 87 percent of adults reported a rise in their living expenses over the last month, a figure which had not dipped below 80 percent since February 27, 2022.As a result of this decrease in demand, it took, on average, longer for dealerships to sell a used car in October 2022 compared to October 2021. Independent dealers were the most impacted by this, going up from 44.4 days to 50.6 days to sell. While it took longer for independent dealers to sell their used vehicles, they were also the most impacted by the growth in supply. Independent dealers recorded on average a stock increase between October 2021 and 2022.
The cost of living crisis faced by the sector also inflated the value of 17 percent of nearly new cars on the market, making them more expensive than purchasing a new vehicle in October 2022. In contrast, only four percent of nearly new cars were priced above new cars in January 2021.
