According to definitive data from British Car Auctions (BCA) – the UK’s leading vehicle remarketing business – there is clear evidence that sales of used vehicles played a crucial role in the motor industry’s recovery in 2009 and continue to make a significant contribution in 2010.
Much expectation was put on the Government’s Scrappage Scheme to inject life into the retail motor sector during the recession – and it clearly played an important role – but BCA’s 2010 Used Car Market Report shows that the motor industry began the long climb out of recession in 2009 as a result of improving used car values. This was despite new and used car volumes reaching their lowest points for the decade.
Although volumes fell in both the new and used markets last year, values held up well against numerous economic pressures. Used car values actually hit new record levels, exceeding £34 billion for the first time as prices rose sharply. Average used car selling prices also recovered strongly in 2009, rising from £4,868 in 2008 to £5,422 in 2009.
In contrast, the 2009 new car market value remained flat at £28 billion. Higher than inflation rises in new car prices offset the effect of lower new car volumes, a shift towards smaller cars and scrappage scheme and other marketing discounts.
However, in both 2008 and 2009, the used car market value has been significantly larger (£4 billion and £6 billion respectively) than the new car market value.
“The UK used car industry has got better and better at meeting the needs of motorists” explained Tony Gannon, Communications Director, BCA. “And it is this ability to provide a broad range of products at every price point, with a good choice of ‘value adds’ such as warranties and servicing packages, that we believe sustained this crucial revenue stream in 2009.”
Dealers capitalise on used car sales
Dealers continued to make the most of used car demand, growing their turnover by £1.2 billion to over £25 billion as they sold 3.53 million used cars last year. On average, dealers used car selling prices rose by £593 to £7,143.
Franchised dealers selling their own brand averaged £9,840 per used car deal, while used car supermarkets averaged £8,880. Franchised dealers achieved an average sales value of £6,883 when selling other brands of used cars.
But the private-to-private market shrinks
The private-to-private sector, meanwhile, continued to falter, as its market value dropped by over 20% to £5.57 billion, and volumes fell by 17.7% to 2.2 million. The private sector’s average used car prices were relatively flat at £2,512.
Used Car Market Dynamics
In particular there was a sharp decline in sales of 0-2 year-old cars, which fell by 22% to 762,000 units. This reflected the marked fall in new car volumes in 2008 and 2009 – driving this sector’s share of the used car market down to 14.7%.
Sales of cars in the 3-5 year age group were stable in 2009 at 1.88 million, their
used car market share rising from 28.3% to 29.9% year on year. However, sales of 6-8 year old cars dropped 6.5% with their market share remaining steady at 23.5%. And sales of 9 years-plus cars continued their long-term decline in 2009, by a further 1.6% to a 20-year low of 2.17 million units and a used market share of 34.5%.
Scrappage – creating a new generation of new car owners
Of those who bought a new car under the scrappage scheme, 38% bought a new car for the first time, while 30% said they ‘replaced a car they otherwise wouldn’t have changed’ during the scrappage period. Clearly both of these groups are an important future marketing opportunity for savvy dealers.
Of those not taking advantage of the scheme, 38% did not have an eligible vehicle, 30% didn’t want to replace their vehicle during the scrappage period and 11% do not plan to replace their car in the future. 8% said they could not find a car that met their needs, while 6% did not believe the £2,000 incentive was big enough.
Consumer used car buying plans for 2010 and beyond
The BCA Used Car Market Report suggests that there is still considerable caution about car purchase for the next 12 months. Perhaps not surprisingly, the number of motorists who think they, or a member of their family, will ‘certainly’ or ‘quite likely’ buy a used car in the next 12 months, dropped one point in the 2010 survey to 16% – while those who believe there is a 50:50 chance of doing so rose two points to 10%.
Two out five motorists intend to buy a used car next time they change, although the number of prospective buyers planning to buy a nearly-new car has fallen to 8%; compared with 9% last year and 13% three years earlier.
Type of used car
The mix of used car sales is virtually unchanged over the past two years; hatchback sales accounting for 46% of the used car market and saloons remaining at 20%. However, sales of off-road vehicles edged up two points to 7% of the market, while estates fell one point to 8%.
Diesel-engined cars’ share of the used car market has jumped 10% in the last four years, reaching 36% this year, from 33% in 2009 and 26% three years earlier. This continued trend towards used diesel brings it ever closer to the new car market share of 42% reflecting the growth in diesel power within the fleet market.