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Used cars: increasing pessimism in the market

By Mike Hind, CAP communications manager

In researching the business performance and sentiment of the used car trade market it is clear that there is a world of difference between the experience and views of franchised and independent dealers.

The restrictions on franchised dealers mean that, as a general rule, they find life tougher in a fragile market than their independent counterparts.

This will surprise no-one, given the astronomical overheads many franchise dealers carry, along with the inevitable restrictions on their freedom to pitch their offering to match exactly what their retail customers want.

These disadvantages are manifested in the monthly research conducted by CAP among a large national sample of dealers.

Performance in August this year, the data for which was gathered in early September, reveals the scale of the difference in the results and mood experienced by both.

Aside from the trend-bucking proportion of franchised dealers reporting ‘considerably better’ month on month sales, the results are in line with those from most months, which tend to reveal more positive trading conditions for independents.

This is also broadly confirmed by reference to the results from the same month a year previously.

Analysis of the picture painted by all dealers during the summer is very revealing too.

The first notable aspect is the steady reduction in the number of dealers enjoying improved sales and the corresponding increase in the number since June reporting reduced sales.

This is also accompanied by a reduction in those reporting stability and a rise in dealers describing their fortunes as ‘considerably worse’ – albeit still representing small numbers.

Dealer reports of year-on-year used car sales performance also mirror the month-on-month picture.

Again we see those reporting slightly better sales dwindling, along with a corresponding rise in the numbers reporting it as slightly worse.

Finally, two further questions – how do you find the business climate at present and how do you feel business will change over the next quarter – indicate a rise in pessimism that might not otherwise be revealed if we were to focus only on levels of trade supply and demand, along with values.

While this does not suggest that the market is about to fall off a cliff, there is a clear trend toward an increasingly pessimistic view of the used car marketplace.

In view of the ongoing fragility of the economy and the constant flow of alarming wider economic news, there are no surprises here.

Nonetheless, it does point the way toward a need for increased caution when buying stock.

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