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Confidence hit as used car values continue to fall

Only a little over a quarter of the franchised dealers questioned for the lastest dealer opinion survey expect profits from used cars to grow over the coming 12 months.

Answers to this and other questions show how confidence has taken a pounding, and many blame manufacturers for subsidising new car sales.

Those who anticipated making more money from used car sales over the next year accounted for 28%, with 31% expecting a decline. Another 41% thought profits would remain the same. Used car sales became an important source of revenue for dealers when margins on new sales started to slide in the Nineties.

The recession forced many retail buyers to break the habit of a regular new car and to buy used instead. The flow of nearly new cars, as manufacturers forced the market, soon found customers.

But this forcing of the market started to affect residual values because there were too many 'commodity cars' with a limited appeal to buyers.

The inevitable fall in values in the late Nineties was a factor in the collapse of the Car Group which ran a network of car superstores.

The executives surveyed were asked whether manufacturers' offers (such as free loans and special editions with extra equipment) harmed their used car sales. The answer was 'yes' from 61%, with 39% thinking they did not.

Carmakers have targeted people who took the view a used vehicle was a better buy than a new one. It was essential to break down the barrier caused by the realisation that new cars lose value as soon as they are driven away from a showroom.

Free insurance has become a popular feature, as it removes a cost people resent paying if it means choosing a derivative with less equipment.

According to the survey, 94% of dealers have seen a slump in residuals this year, which equates to a fall in the value of the stock they are holding.

And 72% replied 'yes' when asked whether values remained on the slide. This is a worrying finding for dealers, though the survey was conducted before the Government published details of the action it plans on the Competition Commission report findings.

Industry leaders welcomed Trade and Industry Secretary Stephen Byers' statement, saying it would end the period of uncertainty. It remains to be seen how long it takes for this to restore confidence in the market.

A further question related to the attitude of used car buyers, and whether they were more or less determined than a year ago to buy a particular make.

The responses showed dealers were split three ways on this issue: 35% said more divided, 33% replied less and 32% had seen no great difference.

Only a little over a quarter of the franchised dealers questioned for the survey expect profits from used cars to grow over the coming 12 months.

Answers to this and other questions show how confidence has taken a pounding, and many blame manufacturers for subsidising new car sales.

Those who anticipated making more money from used car sales over the next year accounted for 28%, with 31% expecting a decline. Another 41% thought profits would remain the same.

Used car sales became an important source of revenue for dealers when margins on new sales started to slide in the Nineties.

The recession forced many retail buyers to break the habit of a regular new car and to buy used instead. The flow of nearly new cars, as manufacturers forced the market, soon found customers.

But this forcing of the market started to affect residual values because there were too many 'commodity cars' with a limited appeal to buyers.

The inevitable fall in values in the late Nineties was a factor in the collapse of the Car Group which ran a network of car superstores.

The executives surveyed were asked whether manufacturers' offers (such as free loans and special editions with extra equipment) harmed their used car sales. The answer was 'yes' from 61%, with 39% thinking they did not.

Carmakers have targeted people who took the view a used vehicle was a better buy than a new one. It was essential to break down the barrier caused by the realisation that new cars lose value as soon as they are driven away from a showroom.

Free insurance has become a popular feature, as it removes a cost people resent paying if it means choosing a derivative with less equipment.

According to the survey, 94% of dealers have seen a slump in residuals this year, which equates to a fall in the value of the stock they are holding.

And 72% replied 'yes' when asked whether values remained on the slide. This is a worrying finding for dealers, though the survey was conducted before the Government published details of the action it plans on the Competition Commission report findings.

Industry leaders welcomed Trade and Industry Secretary Stephen Byers' statement, saying it would end the period of uncertainty. It remains to be seen how long it takes for this to restore confidence in the market.

A further question related to the attitude of used car buyers, and whether they were more or less determined than a year ago to buy a particular make.

The responses showed dealers were split three ways on this issue: 35% said more divided, 33% replied less and 32% had seen no great difference.

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