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Used car sales will recover quicker than new car market

Used car sales will recover at a faster rate than new car registrations over the next five years, according to predictions from Manheim.

The remarketing and retail services company makes this prediction, in spite of the reduced volumes of vehicles due back into the wholesale market in three to four years time, as a result of weak new vehicle registrations in 2008 and 2009.

The report also highlights the real cost of the recession over the seven year period beginning in 2008, as being an overall reduction in total new and used car sales in the UK of around 5.75 million vehicles.

Manheim believes that the overall effect on the new car market over a seven year period will be a loss of around 2.5 million vehicle registrations which equates to more than an entire year’s new vehicle activity.

This is based on the average running rate of new vehicle registrations in the years immediately before 2008, against the forecasted recovery rate each year to 2014.

Even by then, Manheim’s view is that the new car market may still not have recovered to the levels seen in 2006/2007.

However, Manheim is more bullish about the used car market.

Typically there are over three times more used car transactions in the UK each year than there are new registrations. Manheim’s view is that the overall used car market will be reduced by around 3.25 million vehicles over the seven year period to 2014.

Given that there are in excess of 6.5 million used car transactions each year in the UK, this is a significantly better position than the new car market.

Rob Barr, group communication director, said: “When you look at the consequences of a serious recession, it not just about the immediacy of the downturn, but the duration of the recovery period, which can often be quite long as the markets both stabilise and then return to normality.”

Dealing specifically with the used car recovery Barr said: “We should remember that there are over 31 million vehicles already in the UK, the turnover of which determines the number of used car transactions each year.

“The shortage of used cars coming back into the wholesale market in three to four years will be around 300,000 to 400,000 per annum and is still only equivalent to circa 1.5% of the total UK car parc. Therefore a very small increase in the stock turn of the car parc will increase overall transactions and more than compensate for this shortfall.

"There is a ‘but’ though: the availability of the younger vehicles coming back into the wholesale market over the next few years will be reduced. Some of this shortage may be offset by dealer self-registrations or an increase in rental buy-back volumes, but we believe that dealers will need to broaden the age and mileage parameters of their retail stock and also proactively encourage incremental transactions from the existing vehicle parc."

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