UK lockdown measures drive used car prices to record growth

As the shutters rolled up from car showrooms across the UK back in June, buyers flocked to forecourts or logged on to car comparison websites.

Then something surprising happened. By and large, they skipped the rows of shiny new models and instead headed to the areas stuffed with used vehicles. Dealers who were used to selling two or three used cars for every new vehicle that rolled off the lot saw the ratio increase to seven or eight.

Four months later, the trend shows little sign of easing.

Data from online car marketplace Auto Trader shows that used car prices rose 7.6 per cent in September compared with a year earlier, the highest monthly increase on record and marking the fifth consecutive month of rising prices.

Chart showing that used car prices have increased since lockdown

The abiding reason for this is wariness about using trains and buses, buoyed by Prime Minister Boris Johnson’s early advice to avoid public transport.

“Currently we’re in a time where car ownership is arguably more important than it’s ever been as people want exclusive use of a car, a safe personal space,” said Ian Plummer, commercial director at Auto Trader. “Consumer demand has been exceptionally strong all summer and it shows no signs of abating.”

But there are other factors at play.

Often, when consumers buy a used car, they trade in an older model that is then passed on to an auction house by the dealer. But many used car buyers are not replacing existing models now — they are increasing their car ownership, adding a cheaper second or third model to the existing family runaround on the driveway.

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But the most surprising addition to the ranks of car buyers are new drivers.

Younger people, who were shunning cars in cities because of ride-hailing apps before the pandemic, have begun booking driving tests at a much higher rate.

Red, the largest driving school in the UK, has seen online inquiries double, and course bookings over the past four weeks are 40 per cent higher than a year earlier.

“Since driving lessons resumed in England on July 4, we have seen an unprecedented number of new customers wishing to learn to drive,” said Red chief executive Ian McIntosh.

Chart showing that older used cars are increasing in value the most

Auto Trader found that 15 per cent of viewers registered on its site were aged 18-24, compared with 6 per cent a year earlier.

Demand for cars in every price bracket, and of every age, are higher than they were a year ago, it found.

Even vehicles that have been on the road for a decade are seeing a resurgence, with prices up 13.4 per cent compared with a year earlier — the highest of any age bracket.

The national scrappage scheme of 2009 meant many earlier models were taken off the roads, so older cars are not only cheap but scarce as well.

The figures also suggest that cautious buyers are shunning the more expensive battery cars, particularly in a time of uncertainty. When sold new, electric cars are roughly a fifth more expensive than their petrol rivals. But given their limited fall in value, second hand models can be twice as expensive as the petrol equivalent.

Chart showing that prices for used petrol and diesel models are increasing the most

In fact, while prices for used petrol and diesel models are climbing, the cost of buying a second-hand hybrid or electric vehicle has fallen each month since January. Like-for-like prices for electric cars fell 5 per cent year on year in August compared with a rise of 6 per cent for petrol and diesel vehicles.

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“Over the past year, consumer demand [for electric cars] has outweighed supply,” said Mr Plummer.

“However, since the emergence of Covid-19, we have seen this trend reverse; whilst supply levels have remained relatively constant, consumer demand has eased, which has been a contributing factor to over six months of consecutive year-on-year price decline for alternatively-fuelled cars.”

While the government is promoting electric vehicles and trying to lower Britain’s CO2 output, the prolonged presence of older polluting cars on the roads is likely to have the opposite effect.



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