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JULY saw the new car market take a dip but used car sales grew 108.6% in the second quarter of 2021 according to the latest figures from the Society of Motor Manufacturers and Traders.

More than 2 million vehicles changed hands, up 6.6% on 2019 pre-pandemic levels, the best Q2 performance and almost the best quarter ever for the used car market.

So what’s going on?  Well, demand for personal mobility increased and stock shortages in the new car market forced some consumers to turn to used models.

Compared to the near standstill of the economy last year, the used car market saw the biggest growth in April, up 307.4% on 2020 with 724,743 transactions in the month, and up 5.0% on pre-pandemic 2019. All months in Q2 saw significant growth, with May and June up 9.9% and 4.6% on 2019 respectively, the best performance for both months on record.

Year to date, the rebound in Q2 has pushed the used car market up 33.3% to 3,855,259 units over the first half of the year. However, this remains -4.9% or almost 200,000 units off the 2019 market.

Demand for used battery electric (BEV) and plug-in hybrid (PHEV) vehicles continued to grow in Q2. Buyers were keen to get their hands on the latest, green technology, helped by increased supply flowing through from higher new car sales and wider product choice, with the market share for plug-in vehicles increasing to 1.3% of the used car market in the quarter. Both BEV and PHEV transactions more than tripled in Q2 (353.9% and 349.8% respectively) to 10,903 and 16,202.

Mike Hawes, SMMT Chief Executive, said, “More motorists are turning to used cars as supply shortages continue to affect the new car market, and the increased need for personal mobility with people remaining wary of public transport as they return to work.

“A buoyant used car market is necessary to maintain strong residual values which, in turn, supports new car transactions. We now need to see a similar rebound in new car sales to accelerate the fleet renewal necessary to deliver immediate and continuous improvements in air quality and carbon emissions.”

James Fairclough, Chief executive of AA Cars said that supply shortages in the new car industry are causing long waits for some vehicles, so pushing some sales towards the second-hand market as some drivers opt to buy used rather than wait for a new car to become available.

He added: “This huge interest in used cars meant enquiries generated to our dealers from the AA Cars site were incredibly strong compared to the first quarter of the year. 
Sales may be further aided by low interest rates, which makes this a good time to take out a car finance deal or unsecured loan, and we have seen car finance applications remain strong. 

“Consumer confidence appears high, and this growth in sales bodes well for the rest of the year.”

In the August edition of the National Association of Motor Auctioneers’ market survey, auction houses reported demand for petrol and diesel vehicles remain strong, with 40% of respondents stating they expected all types of internal combustion engine (ICE) vehicle types to increase, with 60% expecting them to remain the same. These vehicles made up 96.4% of the used car market In Q2.

BEV and PHEVs transactions rose by 353.9% and 349.8%, respectively. This significant increase in demand has led to rising BEV values. 45% of NAMA members anticipating the values of this vehicle type to increase. None expected values to decline over the coming month.

Auctioneers have been reporting that strengthening conversion rates and a positive impact on vehicle values is having a strong effect in the used car market. This is expected to continue into Q3.

There’s increasing interest in used EVs as well. A survey by Admiral Insurance suggests the used car boom will last well into next year. Professor Peter Wells of Cardiff University said: “Second-hand EVs seem to be holding their value and long warranties on battery packs offer additional comfort for buyers.

“They are cheaper to run in comparison to petrol and diesel equivalents with electricity costs being as little as five pence per mile in a small, efficient second-hand electric vehicle.”

Clare Egan, Head of Motor at Admiral said: “With the ban on sales of new petrol and diesel cars being introduced in less than 10 years’ many motorists who are currently looking for a car may be wondering whether now is the right time to make the switch to an electric vehicle.

“Our research shows that many Brits don’t want to fork out for a brand new EV and so a second-hand model could be a better alternative. Unsurprisingly, the second-hand market is currently not as developed as for petrol and diesel used cars and motorists may find they have to travel further than they’d ideally like to find the right car for them. The prices are also often higher than many drivers would like to pay but as Professor Peter Wells points out, the second-hand electric cars hold their value.”

 

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