Will ageing stock, fewer newer cars or falling demand be
the key determiner of future prices?
Charles Wheeldon examines the findings of Professor Peter Cooke’s
report on the used car market.
Go deeper with GlobalData
Evidence that the UK car parc is getting older, and that
fewer newer used cars are entering the market, mean some tricky
decisions for dealers. They now face difficulties concerning the
availability and quality of stock, according to Tim Naylor of
BCA.
Naylor reacted to Cooke’s report on
the used car market which shows that, despite the market for used
cars growing by an extra 270,000 units in 2010 compared to 2009,
the average value slipped by £90 to £5,332.
Retailers, says Naylor, must decide
whether to move to selling higher-mileage older vehicles, reducing
their profit from motor finance, or to compete for the diminishing
pool of lower-mileage vehicles which are likely to become much more
expensive.
Sellers too will have awkward
remarketing decisions to make, Naylor says. Do they invest in
pre-sale preparation? And if so, at what level?
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By GlobalData
He also highlighted the findings that indicated consumers’
next intended purchases were leaning increasingly towards smaller
petrol-driven cars.
“This also poses a problem,” Naylor
said, “because much of the stock entering the used market for the
first time will be diesel-powered, higher specification vehicles
from fleet and leasing sources that are likely to be more
expensive.”
Cooke’s findings reveal that a
record breaking £35bn worth of used cars were sold last year, with
the extra quarter million-plus cars sold generating an additional
£800m.
Dealers’ sales rose by 3.9% to
3,670,000 units, and private sales grew by 10.8% to 2,460,000
units.
Helping to explain why, despite the increased volumes, the
average selling price dropped, were sales of cars in the six to
eight year-old group, which grew, while sales of cars under two
years old fell back 6.9%. Sales of cars in the three to fives
years-old group also slipped by 2.3%.
The report warns that the lack of
good quality two-five year-old cars is building up trouble for the
future. With around half a million fewer new cars being sold
annually since the 2008 economic crisis, the pattern is unlikely to
change before next year.
The report says: “You can’t remove
over 2m new car sales from the used car supply chain without
creating waves in the market.”
BCA communications director Tony
Gannon said: “Motorists and businesses have held onto their cars
for longer.
“The average age for cars on UK
roads rose in 2010 to seven years and three months, which is a
14-year high.
“The trend for older cars is rising
and we believe this could continue for several years to come.”
Cooke also contends that the
economic downturn has had a marked effect on car ownership,
pointing out that this year 5% fewer families (72%) have at least
one car compared to 2010. Two-car households have also dropped 4%
to 21%.
See also: Cooke’s
findings
