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Used car dealers lost £1.7bn last year

Used car dealers lost £1.7 billion in used car revenues as 360,000 fewer used cars were retailed in 2008 compared to the previous year.

This is the stark message from BCA’s 2009 Used Car Market Report, which will be published on August 1, 2009.

Used car turnover for dealers fell to £24 billion - the lowest figure recorded since 2004 – as they sold 3.67 million used cars last year – a six year low.

The losses could have been much greater, but for a change in mix towards the younger, higher-value vehicles that were retailed. This saw the average price of a used car sold by a dealer rise from £6,464 in 2007 to £6,641 in 2008.

The one bright spot for dealers in 2008 was the small increase in sales in the 0-2 year age group, which edged up 0.3% to 856,000 last year, with dealers accounting for 87.2% of sales in this segment. Its effect – in an otherwise falling market – was to stem some of the losses generated by fewer sales of 3-5 year-old cars (down 5.2% and 80,000 units to 1.46 million) and in the 6-8 year segment where dealer volumes slid by 19.2% to 780,000 units, taking their share down to 49.1%.

Dealers also saw their new car market revenue fall from an all-time high of £33 billion in 2007 to £28.1 billion last year, as new car volumes dropped to their lowest point for 12 years and more car buyers opted for smaller, lower-priced models. In total, dealers combined turnover from car sales fell by an astonishing £7.6 billion in 2008 compared to the previous year.

In contrast, the private-to-private sector’s share of used car market value rose by £1 billion to £7 billion from the sales of 2.69 million cars. Private-to-private selling prices were also higher in 2008, rising to £2,581 from £2,179 in 2007, as the private sector increased its share of the market for 6-8 year-old cars.

Report author Professor Peter Cooke said: "This year’s BCA Report shows a motor industry in recession; a recession that has hit the used car market and the new car market.

"However, this is perhaps different to any previous recession in that it is principally man made; created through a lack of credit for goods and services, rather than a lack of demand for products."

Cooke said the combined market for new and used cars has dropped. In 2008, the value of the used car market was some £4 billion higher than the new car market; a clear message that buyers will move from buying a new car to a used car in times of recession. Even so, the general slowing down in the velocity of business last year implies lower profit opportunities across the sector.

Looking ahead, the Report suggests the drop in new car volumes means there will be a significant fall in the number of younger used cars coming to the market in the next two to three years – significantly less than the used car market would conventionally be able to absorb.

The Report explores the implications in terms of used car shortages, price and, for franchised dealers in particular, a much smaller parc of younger cars for service and repairs.

The Report says a steady decline in used car volumes, particularly in the younger segments, will almost inevitably continue as the car parc shrinks and changes shape.

This, in turn will mean used car retailers will need to seek to enhance their value added, and profitability per unit, if they are to remain economically viable.

A further phenomenon, partly caused by recession, is the growth in private-to-private sales shown in this year’s report.

While one might expect a growth in a ‘grey market’ in a period of recession, this throws the gauntlet down to the professional sellers in the field. What might used car retailers do to recoup their share of the market?

Elsewhere in the Report, BCA continues its benchmark consumer survey of motorists and their opinions on used cars and those that sell them. The survey – conducted by BMRB – ran in March 2009 based on interviews with 2,000 respondents, representative of the UK adult population aged 17 years and over.

The Report confirms that motorists remain unwavering about what they expect from a used car retailer when buying a used car. What they want is unsurprisingly straightforward – the ‘right car at the right price’, ‘a good deal’, ‘to trade in their old car’, ‘to deal locally’ and ‘with friendly, helpful and professional staff.’

The Report says franchised and non-franchised used car dealers who consistently meet these requirements, are well placed to attract and retain a growing number of used car customers.

  • The BCA used car report 2009 is based on information from Omnicar, the Society of Motor Manufacturer and Traders, and other industry and trade bodies and was prepared by Professor Peter Cooke, the Centre for Automotive Management, University of Buckingham Business School. It also contains consumer research carried out by BMRB International on behalf of BCA. Fieldwork for this research was carried out during March 2009. It was based on interviews with a total of 2,000 respondents representative of the UK adult population aged 17 years and over.

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