Nextgear Capital has said that a used car stock funding is poised for further growth as dealers look to “boost their buying power” amid rising values and a rush for stock.
Days after the Cox Automotive stock funding operation passed the £2bn funding milestone, just four years after it was founded, it highlighted a growing consumer appetite for younger used vehicles, rising retail prices and the predicted growth of the used vehicle market in 2019 as an ideal environment for further growth.
Data released by Nextgear Capital showed that the average age of funded units gradually decreasing to 6.5 years year-to-date, with an average 4.1% year-on-year increase in the sale price achieved on forecourts as a result.
Meanwhile, average holding days have decreased by one to 59, it said in a statement.
And despite the challenges of sourcing stock at the right price, Nextgear said that one-in-four car retailers who responded to Cox Automotive’s latest sentiment survey report said that margins were better than for the same period last year, while 30% say they’ve remained the same.
Nextgear Capital managing director, Liam Quegan, said: “There’s no doubt this is a testing time for the used vehicle sector with multiple factors aligning to create an almost unique set of circumstances.
“The dive in the new vehicle registrations has translated into a surge of retail buyers entering the used market.
“At the same time the wholesale sector is experiencing a dearth of ex-manufacturer, fleet and lease stock.
“This is driving competition amongst dealers as they fight to maintain a strong pace of stock turn and satisfy demand.”
Quegan said that, for many dealers, the necessity to strike fast when the right vehicle becomes available is placing an acute pressure on cash flow, leasing to an increase in the number of those seeking out complementary funding options.
He added: “The number of units we’re funding is increasing month on month plus we’re experiencing a significant spike in the volume of credit limit extension requests.
“These are all indicators of a buoyant market with buyers wanting the ability to flex their purchasing options in order to meet the demands of the market.
“As we look towards 2019 and predictions of a 2.5% growth in the used vehicle sector during the first quarter alone, this pragmatic approach will be even more prevalent.”