Minimum wage rise tops dealer cost concerns in 2025

Rising costs are squeezing dealer profitability in 2025, with the recent hike in the National Minimum Wage cited as the most damaging single factor, according to Startline’s latest Used Car Tracker.

In the May report, 52% of dealers said the wage increase introduced in April is having the greatest impact on their bottom line – outstripping pressures from rising stock costs, premises expenses and employer National Insurance.

Paul Burgess, chief executive at Startline Motor Finance, said: “The minimum wage increases – 6.7% for over 21s and a hefty 16% for 18–20-year-olds – are creating upward pressure across pay bands.

"Even if only a minority are on the minimum, it has a knock-on effect throughout the workforce.”

The monthly survey, conducted by APD Global Research of 66 dealers, found 45% are struggling with more expensive stock, while 41% flagged higher premises costs and 38% pointed to new National Insurance contributions.

Dealers also cited rising marketing (33%) and technology spend (33%), along with growing wage demands (32%), training costs (23%) and investment in EV infrastructure (20%) as additional sources of financial pressure.

Burgess added: “What we’re seeing is a broad-based rise in overheads that dealers can’t easily avoid.

"From stock acquisition to salaries, premises, and even digital spend – the pressure is coming from all sides.”

He noted that stock costs, especially for three-to-five-year-old vehicles, remain high due to ongoing supply shortages, while business rates and property-related outgoings continue to climb.

While the employer National Insurance hike attracted strong criticism when announced in the 2024 Budget, it appears to have taken a back seat in day-to-day concern compared to wage increases and stock values.