Dealers, traders and garages are paying more attention to used cars in 2019 as the market continues to shift away from new car sales. With record high used-car prices across different fuel types, we explore how you can capitalise on this trend.
Average prices for used cars have been at a record high for a while now. While the most recent data from Auto Trader’s Retail Price Index shows that this upward trend may be slowing down, the growth in value of used cars of various fuel types has been notable since the start of the decade.
If you’re a motor trader, you may have already taken advantage of this pattern. But if you haven’t, it’s well worth considering how you can adapt your business to cater to the growing demand for ‘almost-new’ cars and capitalise on the record high prices for used cars in 2019.
What has caused the rise?
This growth can be attributed to a rise in new car finance volumes. With more and more consumers reluctant to buy a new car outright and instead keen to get their hands on brand-new models with two to three-year Personal Purchase Contract (PCP), there has been an increase in younger cars entering the market.
These cars are essentially fresher, more advanced and in much better condition than ones that have entered the market after a five-year contract, for example. And the value of these cars has driven the average prices of second-hand cars up across the sector.
Brexit uncertainties and larger economic factors have also played a part in this trend with more consumers tightening their belts recently. As it stands, many are still uncertain about how the upcoming political changes could affect things like import and export costs and how the industry as a whole will adapt to the upcoming changes (whatever they may be.)
Jaguar Land Rover has already cut jobs with potential shut-downs in the pipeline in the event of a no-deal Brexit. In short, you should be gearing up your operations to sell and service more used cars as many consumers play it safe this year.
Opportunities for retailers
The automotive industry has faced a number of different challenges recently, as recent government regulations and consumers buying habits have changed the game. But in spite of this, we’re seeing that used car sales have shown great resilience.
With increasing interest in the younger and more desirable used cars showing up in garages across the country, we’re likely to see this trend continue. Traders and dealers will be wise to take note of this and consider how they can stock certain models to capitalise on the high prices they are typically being sold for.
The appetite for car finance doesn’t seem to be slowing. This means a constant stream of these vehicles will be on the market once they have lived out their two to three-year PCP contracts.
If possible, it certainly makes sense to buy a large stock of these used vehicles now before potential prices increase. For larger traders, it is also important to offer attractive finance facilities on used cars that further encourage buyers to go in this direction. The goal is to increase your profits by attracting consumers with more affordable options than they can find elsewhere.
Favourite fuel types
The average price of a used car reached an all-time high of £12,977 last month. But in terms of specific fuel types, used diesel prices experienced three months of decline from an average of £14,661 in October, to £14,536 in December.
Meanwhile, the average price of used petrol cars has increased steadily, climbing from £10,733 in May 2018, to £11,288 in December.
Alternative Fuel Vehicles (AFVs) have performed similarly, climbing consistently from £19,944 in July 2018, to £21,102 in December 2018, according to the most recent Auto Trader Retail Price Index report.
Increased interest in AFVs
An increasing number of consumers are showing interest in AFVs. Last year in 2018, a significant amount of people searched for AFVs, such as electric, hybrid, bi-fuel, LPG and petrol-ethanol, on the Auto Trader website.
AFVs accounted for just 4 per cent of all fuel related searches at the beginning of 2018, but then grew to 7 per cent by October 2018 where it remains steady until now.
This is just one more reminder that you need to be watching closely what happens in the market as more and more consumers look to new AFVs as their next car upgrade. Whether it’s identifying the right vehicles to stock or preparing your services to handle EVs, this is an all-important transition in the world of motor trading.
Whether you’re thinking about stocking used electric cars in the coming months or modifying your operations so that you offer more used car services, remember to future-proof your business with comprehensive motor trade insurance.
No matter how the market continues to evolve this year and beyond, the right cover will continue to offer your business the protection you need to succeed.