Automotive dealers: Flashing amber

Major PLCs have been significantly upgrading their half year forecasts on the back of the strong market. However, all good things must come to an end and we believe the used market is beginning to flash amber.

The used car market continues to be in flux. Despite all the positivity with summer holidays upon us, demand is definitely becoming more lumpy. This is reflected in our call index which shows calls drifting off. We’re also seeing this in the manufacturer used car locators.

Headline Autotrader figures

• 2021 stock, MoM 21.0% increase, YoY 34.3% increase
• 2020 stock MoM 3.1% decrease, YoY 41.6% decrease
• Total market MoM 1.8% decrease, YoY 2.5% decrease

Top 5 brands by market share of 2021 stock

• VW 13.2%
• Audi 9.5%
• Mercedes 6.9%
• BMW 6.9%
• Toyota 6.0%

So why is the market flashing amber? It seems to be a combination of the following factors:

• The used stock shortage is continuing, and this is driving prices ever higher. However, consumers are beginning to draw in their horns and are focusing on the holidays.
• With the price rises, many consumers have positive equity in their vehicles. This means they’re looking at the new market in a different light. They’re prepared to wait for a new vehicle and hold onto their existing car for longer.
• Finance rates on used vehicles are not competitive, so why not wait for a manufacturer deal?

If consumers are holding back and keeping their cars for longer, then the clever dealers will be those who look at creating suitable deals within their aftersales department. The focus should be on creating service work and finding ways to get customers through the door to check their vehicles. This gives you a chance to put them into a new car in the future whilst gaining valuable aftersales revenue.