By Philip Nothard, retail and consumer valuation editor, CAP
Following last month’s look at the pressure on margins, it’s time we turn to a less frequently discussed issue: the consumer change cycle.
Are significant numbers of consumers now holding on to cars for longer than they used to? According to our own research, the answer is yes.
But perhaps the really interesting thing is that a large number of dealers also report that their customers are on a shorter change cycle.
There are no surprises in the fact that more than half of the dealers we have researched say their customers are changing less frequently.
This behaviour represents a shift, for many people, into changing when they need to, rather than when they simply fancied a different car.
For that sizeable minority of dealers who say their customers are changing more frequently the reasons behind the shift are less clear.
It may be that many consumers decided to downsize in terms of engine size during the last few years when money was tighter, in an attempt to mitigate their motoring costs.
If this decision – also brought on by necessity rather than free choice – was a direct response to the new economic conditions since 2008 it may not represent a trend. In other words, the most recent change of car was a defensive action they will keep hold of it for as long as possible.
For dealers a shorter change cycle would be good news.
A frequent observation by dealers is that they are seeing more cars that are past their MoT due date, with gappy service histories and generally more wear and tear.
One dealer told us that on part-exchanges their average preparation cost had increased from £300 to £500 per unit on cars between four and six years and they had even seen a small increase from £200 to £250 on their one to three- year-old cars.