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£1.7 Billion loss hit used trade last year
publication date: Jul 30, 2009
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author/source: Robin Roberts
Used car dealers lost £1.7 billion in used car revenues as 360,000 fewer used cars were retailed in 2008 compared to the previous year. This is the stark message from BCA’s 2009 Used Car Market Report, being published on 1 August 2009. Used car turnover for dealers fell to £24 billion - the lowest figure recorded since 2004 – as they sold 3.67 million used cars last year – a six year low. The losses could have been much greater, but for a change in mix towards the younger, higher-value vehicles that were retailed. This saw the average price of a used car sold by a dealer rise from £6,464 in 2007 to £6,641 in 2008. The one bright spot for dealers in 2008 was the small increase in sales in the 0-2 year age group, which edged up 0.3pc to 856,000 last year, with dealers accounting for 87.2pc of sales in this segment. Its effect – in an otherwise falling market – was to stem some of the losses generated by fewer sales of3-5 year-old cars (down 5.2pc and 80,000 units to 1.46 million) and in the 6-8 year segment where dealer volumes slid by 19.2pc to 780,000 units, taking their share down to 49.1pc. Dealers also saw their new car market revenue fall from an all-time high of £33 billion in 2007 to £28.1 billion last year, as new car volumes dropped to their lowest point for 12 years and more car buyers opted for smaller, lower-priced models. In total, dealers combined turnover from car sales fell by an astonishing £7.6 billion in 2008 compared to the previous year. In contrast, the private-to-private sector’s share of used car market value rose by £1 billion to £7 billion from the sales of 2.69 million cars. Private-to-private selling prices were also higher in 2008, rising to £2,581 from £2,179 in 2007, as the private sector increased its share of the market for 6-8 year-old cars. Report author Peter Cooke commented “This year’s BCA Report shows a motor industry in recession; a recession that has hit the used car market and the new car market. However, this is perhaps different to any previous recession in that it is principally man made; created through a lack of credit for goods and services, rather than a lack of demand for products. He continued “The combined market for new and used cars has dropped, even from the lower 2007 volumes reported last year. In 2008, the value of the used car market was some £4 billion higher than the new car market; a clear message that buyers will move from buying a new car to a used car in times of recession. Even so, the general slowing down in the velocity of business last year implies lower profit opportunities across the sector.” Looking ahead, the Report suggests the drop in new car volumes means there will be a significant fall in the number of younger used cars coming to the market in the next two to three years – significantly less than the used car market would conventionally be able to absorb. The Report explores the implications in terms of used car shortages, price and, for franchised dealers in particular, a much smaller parc of younger cars for service and repairs. The Report says a steady decline in used car volumes, particularly in the younger segments, will almost inevitably continue as the car parc shrinks and changes shape. This, in turn will mean used car retailers will need to seek to enhance their value added, and profitability per unit, if they are to remain economically viable. |
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