Used car market is key growth opportunity for 2016

Photo of Louise Wallis 620

The used market represents a key growth opportunity for franchised dealers in the year ahead.

As the economy improves, a wider demographic of consumers is returning to the used market.

Their natural leaning towards a used purchase is being facilitated by the availability of PCP finance on cars up to five years old at the outset of an agreement.

The used car market for franchised dealers is broadly estimated to be three times that of new cars. At the same time, the margin opportunity is often greater.

Add to this the potential for add-on and lifetime sales, notably from aftersales and servicing where performance often lags behind new car activity and an increasing focus on used car activity in the year ahead seems to be an attractive option.

Activity by trade buyers suggests that this is a strategy more dealers are adopting. It is an encouraging move that in turn will help support residual values.

Despite concerns about the volume of PCP returns coming into the remarketing channel, units have largely found a ready market.

For the first time since the economic downturn, it is fair to reflect that remarketing has returned to a steady-state.

The supply and demand equilibrium is in a good place, aided by increased access to stock funding. Volumes are good and pricing reflects the good balance of supply and demand.

The overall position is that activity through NAMA members has increased in 2015 and the outlook is for a further increase in the year ahead. The key driver of demand is the consumer.

After a long period where UK car parc aged, a slow turnaround is now taking place. The ripple impact of increasing disposable income is now reaching a wider demographic.

Consumers who to date have delayed changing car are actively becoming purchasers once again. Some may opt for a new car, but for many the value offered by a used purchase combined with PCP affordability remains appealing. It is to this market that more franchised dealers are turning their attention.

It seems clear that franchised dealers are switching even greater attention to the retailing of used vehicles.

Many are self-generating used car stock and some of the very largest groups are promoting their car buying activity through national television advertising.

Even then, activity at our members auctions and online is on an upward trajectory that is outperforming new car registrations that we expect to continue into 2016.

[“source-motortrader”]