- Used car prices rise 11% YoY to £10,724 (December 2021)
- Constrained supply of new cars pushing prices higher as supply chain disruption bites
- CarFinance 247 financed 53% more cars YoY as demand continues to boom
- London leads the way with prices up 18.9% YoY as motorists look to cleaner, greener models to comply with ULEZ
CarFinance 247, the UK’s leading online motor finance platform, has reported an 11.8% rise in the price of vehicles sold, echoing rising inflation across the economy.
The average purchase price for cars bought through the platform was £10,724 in December 2021, up from £9,594 in December 2020, and up a whopping 35.1% from the pre-pandemic high of £7,937 in December 2019. However, the double-digit annual growth contrasts with a slower 2.8% increase since the last 247 UCPI in October 2021, as consumers turned their attention to Christmas.
The steep annual growth is being driven by a continued decline in the number of new cars being produced and registered, making it more difficult for consumers to obtain new models and putting pressure on the supply of used vehicles. The number of vehicles listed by CarFinance 247’s network of 4,000 independent dealerships increased slightly to 112K but used car demand continues to outstrip supply on forecourts.
Prices are rising fastest in London, jumping 18.9% year on year to £13,600, a sign that consumers are continuing to seek newer, greener models to beat the ULEZ charge. 2In the North East, prices rose 9.1% to £9,513, and in Scotland, by 15.2% to £10,987. The South West saw prices rise more slowly – an increase of 8.4% to £9,429 – and fell below their £10,830 peak in August 2021.
The boom in used car prices comes as car manufacturers face continued pressure from the global semiconductor shortage. Chips are an essential part in many modern vehicles and their scarcity is forcing manufacturers to cut, or even temporarily halt, production. As the UK economy recovers, demand for vehicles is also on the rise, with CarFinance 247 financing 53% more cars in December 2021 than December 2020. Reduced supply combined with increased demand for vehicles has created a perfect storm for used car price inflation.
With car prices growing rapidly, CarFinance 247 is seeing increased demand for its services, with applications for finance soaring to over 100,000 a month, leading the company to increase its workforce by 20%.
Commenting on the data, Reg Rix, CEO of 247 Group, said: “The UK’s used car market is booming, and the 11.8% annual price increase is indicative of roaring consumer demand. Even so, the rate of price growth did slow in Q4 2021 as consumers diverted spend towards Christmas and other inflationary pressures started to impact disposable income.
“While it’s too early to say if the 2.8% growth recorded in the last quarter is purely seasonal or signals the start of a wider slowdown, we’ll be keeping a close eye on the market throughout 2022.
“Consumers are being squeezed with the increased cost of living and so they may choose to spend less on a car, stunting price growth. However, the international supply of new cars still lags the enormous consumer demand. As the increased complexity of new cars calls for more semiconductors, as do new phones and consoles, chip foundries around the world are struggling to keep up. This situation highlights how inflationary pressures filter through from new products to affect used markets, and we may start to see prices pick up again.
“Dealerships in our network face an uphill battle to source quality used vehicles and there are few signs that new car production will increase substantially any time soon. Faced with these rising prices, finding an affordable car finance deal becomes even more important and CarFinance 247 remains perfectly placed to help consumers find and finance their dream car."