Used Car Boom as New Car Sales Slump in November
In all aspects of life, there are winners and losers in just about every situation, and the lockdowns imposed by the various UK governments are no exception. While some people get to spend more and more time either working from home or not working at all but still getting full pay, others are not so lucky, and reduced incomes, or redundancy and no income all, becomes the reality for many.
Different parts of the car industry are having vastly different experiences this year too, and the clear message appears to be that while new car sales are in the doldrums in 2020, the used car market is fairing considerably better and is even experiencing something of a boom.
The new car slump
According to the latest figures published for November by the Society of Motor Manufacturers and Traders (SMMT), the new car market in the UK suffered a £1.3billion hit to revenue. Although showrooms were closed to the public during the second lockdown, hard-pressed dealers still managed to register 113,781 new cars in the month using 'click and collect' capability to keep doing business. However, it still means that 42,840 fewer new cars were put on UK roads in November this year compared to the same month in 2019, which is a drop of 27.4%.
For the year-to-date, the picture is perhaps even gloomier with new car sales down by as much as 30.7%. Overall, that's the equivalent of 663,761 fewer new cars sold to the end of November this year than during the same period in 2019.
The SMMT's Chief Executive, Mike Hawes, said of the figures, ˜ Compared with the spring lockdown, manufacturers, dealers and consumers were all better prepared to adjust to constrained trading conditions. But with £1.3 billion worth of new car revenue lost in November alone, the importance of showroom trading to the UK economy is evident and we must ensure they remain open in any future Covid restrictions.˜
The used car sales boom
The picture couldn’t really be any more different in the world of used car sales. According to a pricing analysis study of 900,000 cars in November, the average selling price of a new car was £14,041, which is 8.5% higher than it was last year. Although the rate of growth slowed in November to 8.5% from 8.6% in October, it was still the eighth consecutive month where the average selling price of used cars grew.
Despite dealerships and forecourts being closed, website visits, advert views and leads coming in to sellers all increased in November, all of which is great news for those involved in the used side of the car sales business.
All different types of used cars are in demand at the moment, even diesels. Although demand and supply for diesels did contract during November, average prices for used diesels continued to soar. Demand may still be falling, but a lack of supply is keeping prices high. Demand for diesels may have fallen by 6.7% year-to-date, but supply has contracted by 7.8%, hence the increase in average prices.
What might come as the biggest surprise of all is the news that used SUVs are not seeing the biggest increases in average price, even though they're still the most popular body style with UK buyers. The vehicles experiencing the steepest growth in average prices are hatchbacks with a year-on-year (YoY) increase of 12.5%, and MPVs coming in close behind with a YoY increase of 10.01%.
National Franchised Dealers Association (NFDA) Chief Executive, Sue Robinson, explained: ˜Despite the lockdown and additional restrictions facing dealers across the UK, it is encouraging that used car prices have remained buoyant in line with consumer demand. Positively, the number of retailers adjusting their stock as well as the volume of cars whose price is being adjusted are both significantly lower than pre-COVID 19 levels, which shows dealers’ resilience and confidence. We look forward to a strong December.˜
It continues to amaze me how many people appear happy to buy used cars without seeing and test driving them first. When it comes to explaining why used car sales are booming while new cars are in a slump though, it's more likely to be down to confidence rather than consumers not being able to go into showrooms during November.
With more and more people rightly being concerned about their finances, buying a new car will be seen by many as an unnecessary indulgence. Even if you need to buy a car, a used car currently looks like a much shrewder purchase than a new one, and it could stay that way for some time to come. That means used car prices are likely to continue to increase as supply drops due to a relative lack of used cars being traded in for new ones.
