Record sales performance, but there’s significant further potential for 2021 with 1.7 million transactions to ‘catch up’
As a result of the record levels of consumer demand in the market, the latest data from Auto Trader reveals most retailers saw their strongest ever sales month in May, trading around 14%[1] above May 2019 volumes. This performance has continued into June, with the first week of the month already up over 15% on the same period two years ago.
Based on a myriad of factors, not least the 1.7 million ‘lost’ transactions in 2020, Auto Trader predicts the exceptionally strong levels of consumer demand will continue for much, if not all, of 2021, which should sustain good used car transaction levels. This figure has been calculated based on the average[2] ownership cycle of a car being extended from 3.5 years to 4.2 as a result of the pandemic. If the UK car parc of 35.1 million cars had turned at the typical frequency observed over the last 10 years, there would have been circa 10 million new and used transactions in 2020, instead of the 8.3 million that took place.
Commenting, Auto Trader’s Chief Operating Officer, Catherine Faiers, said: “From early this year, we have seen huge levels of consumer demand on our marketplace, which has accelerated dramatically since the reopening of physical forecourts in April. As well as fuelling incredibly strong used car sales performance, it’s also contributed to the very sharp uptick in prices, currently at a record 9.7% year-on-year and increased the speed of sale to just 22 days. This trend has led to robust margins and helped to compensate for the lower volume of transactions last year.”
Growing economic confidence and positive sentiment
In addition to this potential backlog of sales, the growing personal economic stability – disposable income and savings – amongst consumers will be another important influence on the levels of demand this year. An onsite survey in May revealed that consumers’ confidence in being able to afford their next car was at its highest level (8.76/10) since Auto Trader began tracking it in January 2020, surpassing the previous peak recorded in February (8.75/10), and even ahead of confidence levels recorded pre-pandemic (8.11/10 in January 2020). 41% of those surveyed said they were more confident than they were a year ago, whilst 54% felt about the same.
The research also revealed the growing importance of car ownership as a result of COVID, with nearly one in three (29%) of the circa 1,000 consumers surveyed believing that owning a car is more important to them now than it was before the pandemic; the highest rate since January. Whilst this positive sentiment shift is apparent in all age groups, it is particularly so in younger demographics. In fact, on Auto Trader, there has been a significant increase in the number of 18-24-year-olds visiting the marketplace, with over half a million more monthly visits from users in this age group in the second half of last year.
What’s more, ever since the first lockdown Auto Trader continues to see c.10% of on-site users who are in market to buy a car specifically to avoid public transport. This should provide retailers with confidence that the current consumer demand trends are likely to continue into 2021.
Catherine concluded: “With the level of disposable income and savings many consumers now have, it seems reasonable that a significant proportion of the 1.7 million new and used car transactions that didn’t occur in 2020, will happen in 2021. We believe that we’ve barely scratched the surface of this year’s potential. Whilst this is of course subject to the continued easing of lockdown restrictions and available vehicle supply, it does highlight the huge opportunities available over the months ahead.”