Solid growth for used car sales wiped out in March but RVs hold firm
The UK used car market fell 8.3% in Q1 2020 to 1.8 million transactions; the result of lowest-ever March figures as the coronavirus lockdown measures took effect but with some positive news for electric vehicles and residual values
Although January and February were up 2.9% and 4.0% respectively, the new figures from the Society of Motor Manufacturers and Traders (SMMT) show the uplift was wiped out by a 30.7% fall in March when showrooms closed.
Despite this, the market for used plug-in electric vehicles has remained strong, with demand rising 13.6% in the first quarter. Hybrid transactions also rose, up 11.5%, taking the total number of used alternatively fuelled vehicle (AFV) sales to 36,493 and take-up is expected to increase further post-quarantine as drivers see the benefits of cleaner lockdown air.
In contrast, petrol and diesel car transactions decreased 9.3% and 7.8% respectively, but still accounted together for 97.9% of all used sales in the quarter, equivalent to 1,814,598 cars.
On a positive note, the latest industry data indicates that average used car residuals are holding firm – despite the challenging market conditions – with prices in March remaining broadly stable, down only 0.2% year-on-year at £13,601. Data also suggests that, while lockdown measures are still in effect, consumers are continuing to search and browse used cars online, with many still looking to buy when the time is right.
Mike Hawes, SMMT chief executive, said: “While it is tricky to predict future demand, the impact of social distancing requirements on public transport means that, for many people, the car will play an even more important role in helping them travel safely to work. Re-opening new and used car outlets will support this, enabling more of the latest, cleanest vehicles to filter through to second owners and help support the UK’s green growth agenda.”
Although there has been no firm date on when new and used car dealers can reopen showrooms, the latest government document on easing lockdown restrictions indicates that this could happen from 1 June, along with other ‘non-essential’ retailers.
AA Cars has also reported some encouraging signs that latent consumer demand is building and that sales will begin to pick up as soon as the dealerships can reopen, as commuters switch to cars from public transport.
James Fairclough, CEO, said: “On the AA Cars platform we have seen a 51% increase in car views in May compared to April, and a 46% increase in car finance requests over the same period. We are also starting to see growth in searches for city cars, which might support the hypothesis that people will be swapping public transport for a car for their commute.
“Dealers should already be busy preparing for the easing of lockdown by adapting their dealerships and processes, to allow customers to visit, test drive and buy with minimal risk and by complying fully with social distance requirements and government guidelines.”
Auto Trader also said its research indicates that the used car market has been “paused, not stopped”, as many consumers are eager to buy their next car when they can.
Ian Plummer, commercial director, explained: “Research we conducted recently revealed that 84% weren’t expecting affordability issues, and only 2% said that they’ve been put off buying a car altogether. There are likely to be new areas of market opportunity too as more than half of commuters previously using public transport, and who have a driving licence, expect to buy a car for their commute post lockdown as they seek safety in their own personal space. Therefore, it’s is essential that retailers are poised to reopen their doors, with enhanced health and safety measures yes, but also with the right stock at the right price. Crucially, this does not mean slashing prices; maintaining prices in line with market valuations will help the used car industry recover together as one.”
Plummer added that alongside new social distancing measures, sophisticated digital offerings would also be crucial, allowing potential buyers to conduct a virtual walk round / test drive of a car, put down a deposit online and arrange safe home delivery of a vehicle.