The latest report from Trend Tracker - The Future of the Used Car Market in Great Britain, 2012 to 2017 - confirms that volume demand for used cars has been depressed since the onset of recession in 2008. Used car sales in 2008 were 4% lower than 2007, and declined by a further 5% in 2009, remaining at around this level in 2010 and 2011. In fact, no more used cars were sold in 2011 than 10 years earlier in 2001.

Trend Tracker’s forecasts indicate that demand for used cars in 2012 will be similar to 2011. But if the UK economy experiences a modest recovery from 2013 onwards, as predicted by the Office for Budget Responsibility, Trend Tracker’s forecasts suggest that demand for used cars will pick up, with an average annual growth rate of 1.5% from 2013 resulting in a used car market of 7.27 million units by 2017.

Although the volume of sales in 2011 fell back to 2001 levels, used car market value increased by 11% between 2001 and 2011, reaching a peak in 2004 before falling back to £36.6 billion in 2011. However, taking into account the effects of inflation, used car market value actually fell by 18% between 2001 and 2011. This was caused by used car unit selling prices falling in real terms (excluding inflation).

Supply and demand both to blame

The supply of used cars from both fleets and private vendors has declined since the recession as a direct result of the weakness of the new car market. And new car sales have continued to be affected by the agonisingly slow recovery of the UK economy, with one effect being a sharp increase in demand since 2010 for used cars costing £8,000 or more.

While this suggests that an element of demand has switched from new to used cars as a lower-cost alternative, the recession and higher fuel prices have also caused demand for smaller, more fuel-efficient cars to increase; ‘B’ segment superminis accounted for 31% of used car volume in 2011, compared to 26% in 2003.
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This sustained depression of used car supply and demand can be blamed at least in part on consumers’ continuing difficulties in borrowing for purchases such as used cars. Around half of all used car sales are financed with some form of credit, and sales volume tends to rise when interest rates fall, and vice versa. Despite record low base rates, consumer interest rates are high and lenders’ criteria remain cautious.

Robert Macnab, Trend Tracker’s lead analyst for The Future of the Used Car Market in Great Britain 2012-2017, said, “Affordability being the main priority for used car buyers makes low-cost, volume brands popular, but it also boosts the appeal of premium brands, because they are more affordable as used than as new car choices.”

Falling numbers of dealers

The headwinds facing the used car sector are hitting many of the businesses that sell used cars. Over one-fifth have disappeared in the past decade with franchised dealers and independent outlets experiencing similar losses in numbers.

Trend Tracker forecasts that from 2012 to 2017, the number of sites retailing used cars in the UK will decline by 11%; independent dealers are predicted to experience the largest rate of decline with a loss of 13% of sites.

Further information

Trend Tracker’s latest used car study forecasts used car market trends, including sales volumes, used car values, and franchised and independent used car retailer numbers, for the coming five years. For further information, please call Chris Oakham on +44(0)870 421 4350 or email coakham@trendtracker.co.uk.

Aimed at a professional industry readership, The Future of the Used Car Market in Great Britain 2012 - 2017 is available from Trend Tracker priced at £1,250 plus VAT inclusive of electronic and bound copies and a Powerpoint executive summary. The table of contents and a list of tables and charts can be downloaded at www.trendtracker.co.uk.