Used Car Market Slows

BCA

BCA Used Car Auctions

The origins of the downturn in the used car market can be seen in a new Report published today by BCA.  The BCA Used Car Market Report, now in its 18th year shows that used car volumes and values fell last year when the uncertain economy and rising household bills were only beginning to affect consumer confidence.

Annual used car volumes fell by 384,000 units to 7.1 million in 2007.  Despite this, UK motorists spent £33.3 Billion on used cars last year, down by £0.6 billion on 2006 but still the second highest figure ever recorded.

Further proof that car sales are cooling is provided by the parc turn figure, the indicator which shows annual new and used car volumes as a percentage of the UK car parc.  This measures the churn in the marketplace and is a useful way of measuring car sales trends.  With weaker sales of 9.4 million new and used cars, versus a growing car parc of 30.2 million, the overall UK car ‘parc turn’ fell 1% to 31.5% last year.

The report, written by Prof Peter N C Cooke and published by the Buckingham University Centre for Automotive Management, paints a picture of a used car industry that is experiencing significant pressures from a number of sources.  Even so, volumes and values remained among the highest recorded in the 18 years of the Report.

BCA Communications Director Tony Gannon commented, “The current trading performance on used vehicles should be seen in this broader context of a used car market that can fluctuate but has an underlying strength.  While our latest report highlights the origins of the current downturn, it also shows how the market has bounced back from similar economic pressures in previous years.  There is a deep-seated resilience in the used car market even when times are hard.”

Market review

The UK’s used car market had mixed fortunes in 2007.  Overall values held firm, as higher sales values offset the drop in used car volumes.

Weaker sales in the 0-2 year and 3-5 year age groups saw used car volumes fall 5.2% to 7.059 million units in 2007.  Both dealers and private-to-private used car sales fell last year, the former down by 2.7% and 108,000 units to 3.97 million, and the latter down by 6.1% (176,000 units) at 2.71 million.

Perhaps unsurprisingly given their strong performance in recent years, franchised and independent used car dealers outperformed the market in 2007, their used car volumes falling by 2.7% compared to an overall used car market fall of 5.2%.  Dealers sold 3.97 million units in 2007, giving them a record market share of 56.3%.

Dealers also continued to dominate used car sales in terms of value, as their share
rose to its highest point for six years – up 1.5 points to 77% in 2007, equivalent to £25.7 billion.

The average sales price of a used car from a franchised or non-franchised dealer was £6,464 in 2007, a rise of £198 compared to the previous year.  The average value of a private-to-private sale also rose last year, by £111 to £2,179.

Consumer Research

The report also questions motorists on their buying habits in an annual survey conducted with BMRB (British Market Research Bureau).  The critical issues that influence the choice of vehicle haven’t changed significantly, with price still coming top of the list at 52% ahead of make/model, mileage and age.

However, environmental issues continue to increase in importance for used car buyers.  This year saw 6% of respondents saying environmental considerations would be an influencing factor when they next buy, compared to 4% last year and just 2% in 2006.  Significantly it is the less well off and poorest sectors of the consumer marketplace that are most likely to consider the environment in their car purchase – almost certainly driven by the rising cost of motoring in the past 12 months.

When asked what they might do to mitigate the effects of the credit crunch on their next car purchase, 9% said they would go for a vehicle in a lower insurance group with the same number saying they would opt for a lower priced car next time round.  For some motorists, the economic conditions would mean deferring a potential car purchase – 7% postponing in the short term, 4% deferring indefinitely.

High fuel costs continue to concern motorists.  When asked what steps they might take to tackle this, half of motorists said they would consider buying a car that does more miles to the gallon next time, with nearly 30% of motorists saying they will attempt to reduce mileage to offset the high cost of fuel.  Interestingly, a quarter said they would move to a vehicle with lower road tax.

The BCA survey also questioned motorists on the effect of the Government’s planned changes in Vehicle Excise Duty.  When asked how the proposed changes might affect the type of car they buy next, 28% of motorists said they would move to a car with a lower CO2 emission rating and 22% said they would look for a car with lower maintenance and fuel costs.  Worryingly for motor manufacturers, 16% said they would consider buying used rather than new next time.

Report author Prof Peter Cooke comments “The market for new and used cars is probably more complex in mid-2008 than for many years. The whole ‘acquisition dynamic’ is being challenged by changing costs and cost relationship, and by car buyers’ economic and employment prospects and security.”

He added “Such challenges are likely to remain in the foreseeable future, as many motorists seek to downsize and others cannot resist a bargain – all within the envelope of a potentially serious economic downturn, if not recession.”

Cooke continued “While some car owners may be able to absorb the rising costs and not change their motoring habits, the majority may well have to make some stark choices – as to when, where and what type of car to buy next. During the last serious economic downturn in the early 1990s, used car volumes held up much better than new car volumes, which slumped by well over half a million units.”

He concluded “The economic downturn might encourage more traditional new car buyers to either trade down to a smaller new car or buy a quality used car instead of a new one.  Those very same buyers may well seek to buy their used car through a franchised or non-franchised used car dealer rather than deal privately.”

3 September 2008 Staff
 
 

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