New car sales are falling, yet the used trade continues to remain stable. Is buying used cars now seen as being a better deal than buying from new? Are the increased pressures on manufacturers and the unknowns around Brexit regarding tariffs for manufacturers causing the market to hold off buying new cars?
Brexit and the Motor Trade
Since 2016 there has been a level of uncertainty regarding Brexit. Many manufacturers who are based overseas have said that they require clarification on the laws and regulations within the manufacturing industry. There are a number of companies who have publicly cut jobs such as Jaguar Land Rover and Nissan – stating that manufacturing parts and then trading outside the UK is likely to have little economic benefit. New car sales continue to fall by as much as 20% and diesel cars sales have fallen by as much as 35%.
As a result, the UK has seen its used car sector retain its position as people look to older cars to fulfil their car needs instead. Currently, there’s no real benefit to the end user in making the switch to buying used practically – but there are less new cars being made overall. There is an advantage when it comes to price, given that in the future it may well be the case that new cars imported to the UK such as Mercedes, BMWs and Audis are more expensive due to tariffs. SMMT suggest that import tariffs alone could push up the list price of cars by as much as £1500 if the brands selling and their networks are unable to absorb these costs.
In Q2 for 2018, there were over 2 million used cars sold in the UK, only down by 0.4% despite a recent rise in interest rates.
Does it affect me as a motor trader?
Being in the used motor trade looks for the time being to be, to quote Theresa May, a ‘strong and stable’ career. It appears that people are still on the lookout for vehicles, but are leaning more on used cars, rather than buying from new. There are advantages with buying used cars: the obvious factor is the price, but now that reliability is proven to be better on modern vehicles, people feel more secure in their investment in buying a used car, knowing it is less likely to require major repairs or expensive parts. There are also better prices for car dealers when it comes to Motor Trade Insurance, having a wide selection of insurers who now offer the service.
Another reason that used car sales remain buoyant, perhaps, is that there is uncertainty over whether petrol, diesel or electric cars should be the consumer’s next vehicle of choice. While there is clearly a push towards greener transport generally, electric cars remain comparatively more expensive than their combustion engine counterparts. There is still some way to go before sales of electric vehicles catch up with petrol and diesel; with fewer of these vehicles entering the used market, there is no ‘cheap’ option for people looking to switch to EVs, even allowing for tax and congestion charge breaks.
Brexit may change this scenario, too, as it is unclear whether there will be more of a legislative push to promote sales of electric vehicles in the UK, or whether the EU rules currently in place around emissions will still be adhered to, relaxed, or enforced with more punitive measures in future. Government policy has already changed in recent years regarding diesel vehicles; might it change once more when we leave the EU?
The most popular cars in 2018
The most popular cars – perhaps unsurprisingly – are still Ford vehicles, with the Focus and Fiesta dominating the “top 10 models in Q2” list. We then see the Vauxhall Corsa, Volkswagen Golf and Vauxhall Astra round out the top 5. There is also an argument that smaller cars are becoming more popular to lower the driver’s insurance costs and because they are more economical as the price of fuel continues to rise in the UK.
To summarise, it appears that despite Brexit causing manufacturers to push out public statements of doom and gloom, the used car trade remains stable. Economic factors are playing a part in the choice of vehicles in the used car industry, but for the time being – things are good.