Used car sales fall as drivers hold onto vehicles for longer
Used car sales are suffering from a shortage of vehicles as manufacturers continue to grapple with a lack of computer chips.
Sales of secondhand cars in the three months to the end of June fell 14 pc below pre-pandemic levels to 1.76m. That was 19pc below the high seen last year, equivalent to 407,820 fewer cars sold.
Last year saw the busiest quarter since records began, as buyers flocked to forecourts after an easing of coronavirus-related restrictions.
The drop-off in transactions comes as problems further up the supply chain put downward pressure on the number of cars coming onto the market. A dearth of computer chips around the world has slowed production lines and choked off the supply of new cars.
Supply problems mean about 2m cars have been "lost" due to production constraints since the pandemic began, according to Ian Plummer of Auto Trader. That leaves many car owners reluctant to sell their vehicles, with the waiting time for some new models currently over a year.
Mr Plummer said: “Given the growing squeeze on consumer finances, it’d be tempting to attribute Q2’s weakening used car sales on crumbling levels of demand, but in reality, the market is reeling from a blow in basic economics – there’s simply not enough cars to sell.
“In fact, due to the double whammy of forecourt closures and a shortage of microchips, nearly 2 million new cars were ‘lost’ over the course of the pandemic, resulting in a significant shortfall of younger cars re-entering the market for sale.”
The price of used cars has risen 40pc in the last three years, according to Mr Plummer, due to resilient demand and the lack of supply.
Chris Knight, UK automotive partner at KPMG, said: “With the rate of new cars entering the market significantly down on previous periods as manufacturers grapple to solve supply issues, consumers are holding onto their vehicles for longer resulting in fewer used car transactions.
“Prices remain significantly higher than pre-pandemic, as consumers are willing to pay a premium to avoid having to wait. There is however evidence that price growth is cooling amidst a cost of living squeeze, and a rise in the cost of driving.”
Mr Knight said demand for cars may start to ease soon, but a sharp drop-off of price is unlikely.
Battery-powered car sales gained ground, albeit from a modest starting point, with sales up by more than half to 16,782 cars. These models now account for just under 1pc of the market.
