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Used car dealers feel price pressure as economy challenges consumer spending

Used car dealers are being challenged by the economic climate with motorists responding to increasing fuel costs by looking to buy smaller, more efficient vehicles.

According to Auto Trader’s newly launched quarterly used car price index some larger vehicles such as the Peugeot 607 or Citroen C6 have seen drops of 22.7% or 26.4% in real terms over the past 12 months.

However, average asking prices for cars in the supermini category remain fairly constant.

Some of the more popular small car models have experienced small increases in actual terms, such as the Ford Fiesta where the average asking price has risen from £6,645 in Q2 last year to £6,842 in Q2 this year.

The Auto Trader Index tracks prices advertised for all used cars on Auto Trader’s site, with January 2010 taken as the base month

Dealers operating in this category could benefit as the Ford Fiesta is one of the top 10 most searched for vehicles on Auto Trader but it also showed an increase in the average asking price sought over the year – potentially delivering additional profits.

The index shows there were also some potential gains available in the luxury end of the market as wealthier buyers focussed their attention on one, head turning vehicle.

Among the more expensive car types, 4x4s and luxury saloons demonstrated resilience.

Luxury saloons such as those manufactured by Jaguar and Lexus have broadly kept their value despite inflation at 5% over the year.

The average asking price for this category on Auto Trader in Q2 last year was £21,136 against £22,151 in Q2 this year.

Average asking prices for lifestyle 4x4s such as the Honda CR-V and Volvo XC60 have also held up well.

The average asking price in this category last year was £11,871 (Q2) against £11,795 this year (Q2).

Again, the focus on the improved fuel-efficiency of a number of models in this category may be driving this trend while there is also anecdotal evidence that for some families one high-performing 4x4 is seen as an adequate replacement for off-loading the family car and secondary car.

Regional variation
While it is well-known that used car prices vary by region, this also offers up opportunities for dealers looking to maximise profits in the coming months. The north-south divide is not quite as clear-cut as might be assumed; for example, the average asking price for a Ford Mondeo was £8,536 in Scotland against £5,755 in the South West, revealing that there is just as much opportunity for dealers operating in the north.

Expanding geographic reach via online and mobile presence could pay dividends, with the Auto Trader Index recording average asking price increases in actual terms, across the East of England, Yorkshire and Scotland.

While the reasons behind these rises could vary, dealers able to reach as large and geographically diverse audience as possible stand to benefit from these and future similar peaks.

Reaching potential buyers

Tim Peake, strategy and commercial planning director of Auto Trader, said: “These first results reveal a clear correlation between the current economic situation and car choice, with smaller, more fuel-efficient cars becoming increasingly popular as people respond to fuel price increases.

“There is also evidence that families with more than one car are moving back to single-vehicle households.

“This year we are seeing adverts for used cars for sale remaining on the Auto Trader site for on average a week longer than the same period last year, so market conditions are clearly making it tougher for dealers to reach closure on deals. This means that increased visibility across several platforms online mobile and their own website will be increasingly important.

“While the market is certainly not immune from the wider economic trends, what the Auto Trader Index does demonstrate is that there are opportunities for dealers to succeed.”


 

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