Demand for used cars this year will be similar to 2011 when the market fell back to levels not seen for 10 years and profitability had fallen by nearly 20%.
A new report from Trend Tracker says demand for used cars has been depressed since the start of the recession in 2008 when sales were 4% lower than the previous year. And in 2011, no more used cars were sold than 10 years earlier.
Robert Macnab, lead analyst for the report, said: “The supply of used cars from fleets and private vendors has declined since the recession as a direct result of the weakness of the new car market.
“And new car sales have continued to be affected by the agonisingly slow recovery of the UK economy, with one effect being the sharp increase in demand since 2010 for used cars costing £8,000 or more.
“While this suggests an element of demand has switched from new to used cars as a lower cost alternative, the recession and higher fuel prices have also caused demand for smaller, more fuel efficient cars to increase, B-segment superminis accounted for 31% of used car volume in 2011 compared to 26% in 2003.
“This sustained depression of used car supply and demand can be blamed at least in part on consumers’ continuing difficulties in borrowing for purchases such as used cars. Around half of all used car sales are financed with some form of credit and sales volume tends to rise when interest rates fall and vice versa.
"Despite record low base rates, consumer interest rates are high and lenders’ criteria remain cautious.”
If the UK economy recovers slightly from 2013, as predicted by the Office for Budget Responsibility, Trend Tracker forecasts demand for used cars will pick up with an average growth rate of 1.5% from 2013 resulting in a used car market of 7.27 million units by 2017.
With inflation factored in the value of the used car market fell by 18% between 2001 and 2011, caused by used car unit selling prices falling in real terms, says Trend Tracker.
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