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Used car margins hold their own amid rising trade prices

So it is clear that dealers have managed to pass on most of the increase in trade values. But what really interested me was to see that the increases in average advertised prices in many cases was significantly ahead of the trade price increase. Since March 2013, the average selling price of a used car – taking in every sector, from city car through to top-end supercars – has increased from £34,513 to £39,459.  If we look at CAP Clean trade values for the same period, the increase has been from £30,081 up to £33,488. That is an average increase of nearly £5,000 for advertised retail prices compared with just over £3,000 for trade values.   

But it would be naïve to assume this means dealers have boosted average margins by £1,798.46 – I know they haven’t.

The real picture comes when you isolate the sectors. In city car, the average retail price has risen by £218, but the trade value has gone up by £254.

For lower medium, the figures are £870 retail but £998 at trade. Analysis, therefore, reveals that much of the overall average difference has been created in the electric, large & luxury executive sectors. Just as in the housing market during the recession, the real money is still flowing into the higher end of the market.

 

Margins have not been destroyed by strong trade values

Nonetheless, the overall picture suggests dealer margins have not been destroyed by the strength in trade values, for the core of the market.

So, although it may be tempting to look at new car franchised dealers with envy for their apparently massive success, the reality is that used car dealers have been – and still are – enjoying a very successful time. In fact, it is probably a better time, because their new car colleagues have a tough target culture to contend with as their manufacturers fight for ever greater market share.

All of this goes a long way toward making sense of the upbeat sentiment recorded in our used car dealer surveys at the moment. The sector is doing well and there are no signs that this will be changing any time soon.

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Comments

  • Karl White - 01/05/2014 16:52

    It's amazing to hear that 'the average selling price of a used car' is so high at £39,459. How do you calculate that? Yes, I agree with your conclusions, it seems so, in our sector - nearly new.

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    • Nobby123 - 05/05/2014 16:26

      @Karl White - the average selling price takes in to account the whole market and sectors involved. It's certainly intteresting when you trend both over time, or even down to individual sectors and observe the relationship.

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