The used vehicle sector will see another year of demand outstripping supply as stock remains hot property while the new market continues to recover.

Cox’s full-year forecast is for 2022 to end on 7.701 million transactions

New analysis by Cox Automotive reveals a projected increase in used car sales compared to last year in its most-likely market scenario. However, while this projection is an increase on 2021, it is still down on pre-pandemic averages.

Its most-likely scenario for Q1 2022 forecasts that the quarter will end on 1.956 million used car transaction. That’s a 15.9% increase year-on-year and 4.2% up on the 2001-2019 average, but 3.2% down when compared with the most recent pre-pandemic 2019 performance.

Q2 2022 is likely to end on 2.003 million transactions, a 7.6% decrease year-on-year, a 4.2% increase compared to the 2001-2019 average, and a 1.5% decrease compared to 2019.

And it says the most likely scenario for the full-year forecast sees 2022 end on 7.701 million used car transactions, a 4.2% increase year-on-year compared to 2021’s forecast of 7.392 million. This would be a 4.4% increase compared to the 2001-2019 average, but a 3.0% decrease compared to the most recent 2019 pre-pandemic performance.

The stock shortages have left older vehicle profiles. Manheim auction data for January 2021 reveals an average vehicle age of 100.9 months, an increase from 89 months recorded at the same time last year. Average mileage also increased from 64,996 to 70,162.

However, despite an older vehicle profile, units are still selling at high numbers due to stock shortages, with the average selling price increasing by £1,917 from last year’s £6,133. CAP Clean conversions also increased from 93.39% to 98.26%, while first-time conversions rose from 77.6% to 83.3%.

Philip Nothard, insight and strategy director at Cox Automotive, added that while key wholesale indicators are starting to fall more in line with pre-pandemic levels than the same period last year, buyers are dealing with a significantly older profile of vehicle, with stock still at a premium.

New car production issues are expected to remain until 2023 and Nothard said recovery will be a “prolonged and gradual process”.

“As a result, we will not see a flood of stock enter the market, but rather a gradual increase as the backlog of orders for new vehicles gets cleared, in turn generating much-needed stock for the used market.”

Over time, as supply issues are resolved, values are expected to decrease, but this will be a gradual process and at a much slower rate than many dealerships will hope for.

Nothard concluded: “As long as new car supply issues remain and used cars continue to be dripped into the market rather than released like a tsunami, then natural market dynamics dictate that values will remain at current levels for some time.”

To read Cox Automotive’s new and used market analysis in its new issue of AutoFocus, click here: https://bit.ly/3g1mIVO.