The 11th BCA report on the used car market revealed that sales volumes dipped by 546,000 units to 6.8m last year. It was the first time the market dropped below 7m for five years and resulted in a £1bn fall in value to £27.3bn.
The report, compiled in association with Sewells Information & Research, showed dealers' sales down 8.3% to 3.69m after three consecutive years above 4m.
BCA's Tim Naylor said: “Last year there was downwards' pressure on volume but the unit value held up fairly well because there was a nice mix of vehicles.
“There has been a steady 2.2m new car market for several years which has created a consistent flow of quality used cars this year, helping the market to recover.”
All used car age groups experienced falling sales last year except the sub two-year-old category, which increased by 179,000 to 1.03m, pushing up its market share to 15%.
Dealers, unsurprisingly, accounted for 888,000 – or 88% – of this sector.
The report blamed uncertainty over new car prices caused by the Competition Commission inquiry for the sales slump. “Having doubled in size during the steep climb of the early and mid-nineties, used car market values have stabilised over the past four years,” it said.
“Despite a volume setback in 2000, used car dealers will be encouraged by the sustained improvement in their used car market share – comfortably over 50%.”
Average sales prices for dealers' used cars rose by £278 to £5,794, primarily due to the increased volume of cars in the more expensive 0-2 year-old category.
BCA surveyed 2,600 UK motorists, of which 39% had bought a new or used car in the past two years. It found that three-quarters of motorists buy a used car as their families' principal form of transport.
Most buyers are influenced to purchase a car at a franchised dealership rather than independent retailer by the specific make/model, with 22% believing dealers are more “reliable and trustworthy”. Warranties attracted 19%.
Thirty-two per cent believe used cars to be better value than new, while 26% are deterred from buying new by the high level of depreciation – up from 19% in 1999.
Growing media interest in car prices and running costs has educated the public about the lifetime costs of motoring. The high-profile slump in residual values in recent years – new car buyers have experienced negative equity and low trade-in values – explains the growing influence of depreciation in choosing a used car over new.
More than half (52%) of buyers value the used car make and model most highly compared to mileage (36%), age (30%), body type (25%) and insurance (21%). Just 15% claimed to be influenced by the specification.
Dealers looking for stock are reminded that hatchbacks (48%) and saloons (30%) dominate sales, followed by estates (8%). Over 65s buy the most estates, accounting for 17% of sales.
Forty-seven per cent of motorists plan to sell their present car through a dealer, either franchised or independent. Northern owners in particular prefer to use dealers, with 50% planning to negotiate a deal when they next change their car.
Escalating fuel costs have prompted 29% of motorists to consider changing to fuel-efficient cars, with smaller-engined cars and diesels high on the list.
Manufacturers predict demand for diesels will rise substantially over the next few years, despite the Government's anti-diesel position.
The importance of the internet as a stock locator and information source is highlighted, with one-third of the country's car owners having access. Of these, 49% would use it to help them find their next car, though only 35% of used car buyers intend to source a model online.
Women prefer to use manufacturer or dealer websites, while men favour dotcom retailers or classified websites like Auto Trader.
But just 16% intend to buy their next car online – the internet remains primarily an information provider. According to Auto Trader, internet users tend to be younger, more affluent and fashion-conscious. They have a clear idea of the type of vehicle they want, with fashionable sportscars like Audi TT and Ford Puma generating the most interest on its www.autotrader.co.uk website.
“The importance of marketing the right vehicles online cannot be overstated,” says Auto Trader in the BCA report. “To appeal to a more affluent, fashion-conscious market, the challenge is to source the vehicles that are that little bit different.”