The used car market has been experiencing a significant decline in sales volume and a surge in prices due to the ongoing supply shortage of new cars. The shortage, which is caused by the global semiconductor chip crisis and the COVID-19 pandemic, has reduced the availability of new cars and increased the demand for used ones. However, the situation is not all gloomy for the used car industry, as there are also some opportunities and trends that could benefit both buyers and sellers.
According to th e Society of Motor Manufacturers and Traders (SMMT), the UK’s used car sales dropped by 8% in the first nine months of 2023 , compared to the same period in 2021⁶. Some 6.9 million used cars changed hands, down from 7.5 million in 2021⁶. The SMMT said that the decline was mainly due to the lack of choice and affordability for consumers, as well as the uncertainty caused by the pandemic⁶.
However in Pickinz Used Cars , the SMMT also noted that the situation was starting to ease, as the supply of new cars improved in the third quarter of 2023⁶. The used car market saw a 4.4% increase in sales in Q3, compared to Q2⁶. The SMMT said that this was a sign of recovery and resilience for the industry⁶.
One of the factors that could boost the used car market is the growing popularity of online platforms and services that offer convenience and transparency for buyers and sellers. For example, Carvana, a US-based online used car retailer, posted improved net income and gross profit in Q3, despite a 18% decline in revenue³. The company said that it was able to increase its market share and customer satisfaction by offering a seamless and contactless online shopping experience³.
Another factor that could benefit the used car market is the increasing demand for electric and hybrid vehicles, which are more environmentally friendly and cost-efficient. According to the SMMT, sales of used alternatively fuelled vehicles (AFVs) rose by 34.4% in the first nine months of 2023, compared to the same period in 2021⁶. AFVs accounted for 9.4% of the total used car sales, up from 6.4% in 2021⁶. The SMMT said that this was a positive trend that could help reduce emissions and support the transition to a zero-carbon economy⁶.
However, the used car market also faces some challenges and risks that could hamper its growth and profitability. One of the challenges is the high cost of financing and borrowing for used car buyers, especially for those with low credit scores or limited income. According to Techstory, a technology news website, getting a used car loan can be difficult and expensive, as lenders charge higher interest rates and fees, and require more documentation and verification¹. The website advised potential buyers to do their research, compare different options, and negotiate the best deal before applying for a used car loan¹.
Another challenge is the uncertainty and volatility of the used car prices, which are influenced by various factors such as supply and demand, seasonality, consumer preferences, and economic conditions. According to MotorTrend, a automotive news website, finding a dependable used car within one’s budget can be like finding a needle in a haystack, as the prices of used cars have soared to record highs in the past year². The website suggested some tips for buyers to find a good deal, such as checking the vehicle history, inspecting the car, negotiating the price, and avoiding scams².
The used car market is undergoing a dynamic and challenging period, as the supply shortage of new cars has disrupted the industry and affected the consumers. However, there are also some opportunities and trends that could create value and growth for the market, such as the rise of online platforms, the demand for green vehicles, and the recovery of the economy. The future of the used car market will depend on how well the industry adapts to the changing environment and meets the needs and expectations of the customers.
Source: Conversation with Bing, 11/7/2023
(1) Second-hand car sales drop due to lack of choice – BBC News. https://www.bbc.co.uk/news/business-64586573.
(2) Carvana CEO says it’s hard to predict when used car prices will come down. https://www.nbcsandiego.com/news/business/money-report/carvana-ceo-says-its-hard-to-predict-when-used-car-prices-will-come-down/3347895/.
(3) Key Things to Keep in Mind Before Applying for a Used Car Loan. https://techstory.in/key-things-to-keep-in-mind-before-applying-for-a-used-car-loan/.
(4) Dave Ramsey: 8 Tips for Buying a Used Car Right Now. https://www.msn.com/en-us/money/personalfinance/dave-ramsey-8-tips-for-buying-a-used-car-right-now/ar-AA1hS53u.
(5) Used Cars | Automotive News. https://www.autonews.com/used-cars.
(6) Car News – Latest Breaking Auto News | Auto Industry News – MotorTrend. https://www.motortrend.com/auto-news/.
Used Car Market Update: November 2023
The used car market has been facing some challenges in the past year due to the global pandemic, supply chain disruptions, and chip shortages. However, there are also some signs of recovery and opportunities for buyers and sellers. Here are some of the latest trends and news in the used car industry.
Used car prices dropped for the second month in a row
According to Auto Trader, the UK’s largest digital marketplace for new and used cars, the average retail price of a used car in October 2023 was £14,804, down 0.7% from September and 1.4% from August1. This is the second consecutive month of price decline, after a period of record-high prices in the first half of the year.
The price drop was mainly driven by a lower demand for used cars, as consumers faced uncertainty and inflation amid the pandemic. Auto Trader also reported that the number of online searches for used cars decreased by 9.5% year-on-year in October1.
However, the demand for used cars is still robust, as many buyers are looking for alternatives to new cars, which are facing long delivery times and limited availability due to the chip shortage. Auto Trader said that the average number of leads per retailer increased by 12.6% year-on-year in October, indicating a strong consumer interest1.
Tips for buying a used car in the current market
Buying a used car can be a smart and economical choice, especially in the current market situation. However, it can also be a daunting and risky process, as there are many factors to consider and pitfalls to avoid. Here are some tips from Dave Ramsey, a personal finance expert and best-selling author, on how to buy a used car right now2:
• Set a realistic budget and stick to it. Don’t spend more than you can afford, and don’t forget to factor in the costs of insurance, maintenance, and repairs.
• Do your research and compare prices. Use online tools and resources to find out the fair market value of the car you want, and check different sources and platforms to compare prices and deals.
• Inspect the car thoroughly and test-drive it. Look for any signs of damage, wear, or tampering, and ask for the vehicle history report and service records. Drive the car on different roads and conditions, and pay attention to how it feels, sounds, and performs.
• Negotiate the price and terms. Don’t be afraid to haggle and walk away if you are not satisfied with the offer. Be prepared to pay in cash or get pre-approved for a loan from a reputable lender. Avoid dealer financing, extended warranties, and add-ons that can increase the cost and fees.
• Get the car checked by a mechanic before you buy it. This can help you avoid buying a lemon or a car that needs major repairs. It can also give you leverage to negotiate a lower price or ask for repairs to be done by the seller.
New and innovative options for buying and selling used cars
The used car market is also evolving and adapting to the changing consumer needs and preferences. There are new and innovative options for buying and selling used cars, such as online platforms, subscription services, and peer-to-peer transactions.
One example is Carvana, a leading e-commerce platform for buying and selling used cars in the US. Carvana offers a convenient and hassle-free way to buy a used car online, with features such as 360-degree virtual tours, home delivery, and 7-day return policy. Carvana also sells used cars directly to consumers, bypassing the traditional dealerships and middlemen. Carvana recently reported improved net income and gross profit in the third quarter of 2023, despite a 18% decline in revenue due to the chip shortage and inventory constraints.
Another example is Shift Technologies, a used-car retailer that operates in the US and Canada. Shift Technologies provides an end-to-end service for buying and selling used cars, including online listings, inspections, valuations, financing, warranties, and delivery. Shift Technologies also uses artificial intelligence and data analytics to optimize its pricing and inventory management. However, Shift Technologies has been struggling financially and operationally in the past year, and announced that it plans to file for Chapter 11 bankruptcy protection and cease operations pickinzusedcars.com .
The used car market is constantly changing and evolving, and there are many opportunities and challenges for buyers and sellers. By staying informed and following some best practices, you can make the most of your used car experience. For more news and updates on the used car industry, visit Pickinz Used Cars, your trusted source for all things used cars.