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Brexit to boost used car market at the expense of new, says Startline

Paul Burgess, Startline Motor Finance

Britain’s Brexit decision could provide a boost to the used car sector at the expense of new car sales, according to Startline Motor Finance.

Motor manufacturers’ suffering the effects of a weak pound and a higher cost of capital will struggle to continue offering the levels of support that has kept the new car sales so high in recent years, Startline’s chief executive, Paul Burgess, suggests.

He said: “In terms of the overall car market, we believe that it is new vehicle sales that are most at the mercy of Brexit trading conditions.

“Manufacturers bringing cars into the UK are having to face increasingly unfavourable exchange rates that will eat away at their margins while, at the same time, finding that borrowing money to put behind their product is becoming more expensive.

“Bearing this in mind, we don’t see how they can continue to offer the kind of headline deals that have kept the new car market on the boil. Something has to give.

“What we believe is likely happen instead is a shift towards the used car sector, creating trading conditions similar to those seen after the economic crisis of 2007-08.”

Burgess said that the used car market was starting to enter a period of oversupply, creating conditions where prices were likely to fall, making them better value.

“One of the characteristics of the car market in recent years has been that used vehicle undersupply coupled with strong new car deals made the differential between new and used very close,” he said.

“Many customers concluded that they may as well buy new because the savings from used were negligible or even non-existent.

“What we expect to happen in the short-medium term is a sensible realignment of the used car sector where differentials between new and used are restored, and this will benefit the latter at a time when consumer confidence will undoubtedly be falling.

“Our advice to dealers from a motor finance point of view is to ensure that they have a lender panel in place that can handle these new market conditions efficiently and flexibly. There is a good chance that your current arrangements won’t fit the post-Brexit world.”

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