At Marsh Finance, we understand that your time is precious, so we’ve made it our mission to delve into the intricate details of the UK used car market. Our commitment is to empower senior stakeholders at car dealerships by providing comprehensive research-backed insights, saving you the time and effort required to decipher the ever-evolving trends in this industry.
In our quest to keep you informed about the dynamic automotive landscape, we are providing comprehensive research-backed insights, saving you the time and effort required to decipher the ever-evolving trends in this industry. Data supplied by CarCondor.co.uk.
In this Article…
Sales Figures Reflect Steady Growth
Revenue Surpasses Previous Month
Challenges Persist with New Stock
Leaders in Stocking
Online Disruptors Continue to Make Waves
Why are dealerships struggling to obtain new stock in the second-hand car market?
Outlook
Sales Figures Reflect Steady Growth
The UK’s major car dealerships have shown remarkable resilience amid ongoing challenges associated with securing inventory. CarCondor.co.uk’s analysis of sales data for August reveals a notable increase, with second-hand car sales reaching 169,322 units, marking a 0.62% surge compared to the 168,283 units sold in July.
Diving deeper into the statistics, we observe distinct patterns across various segments. Franchise dealers experienced a moderate growth rate of 0.35%, while car supermarkets recorded an impressive 4.03% increase in sales. Conversely, independent dealers faced a 3.6% drop in sales during the same period. This divergence in performance hints at changing consumer preferences and the evolving competitive landscape within the used car market.
Revenue Surpasses Previous Month
Amidst these fluctuations in sales, the collective revenue generated by the top 200 dealerships reached £3.57 billion in August, representing a slight upturn from the £3.56 billion recorded in July. This modest increase in revenue demonstrates the industry’s ability to adapt to the changing market conditions and maintain profitability.
Challenges Persist with New Stock
While sales have seen an uptick, the challenges of acquiring new stock persist. August witnessed a 3.77% decrease in new stock levels, with only 153,786 units added to dealerships’ inventories. This decline emphasises the ongoing struggle to secure sufficient stock to meet customer demands.
Leaders in Stocking
Despite these challenges, some dealerships have managed to maintain robust inventory levels. Arnold Clark, a stalwart in the industry, continued to lead the pack with an average of 22,276 second-hand cars in stock. This figure, although slightly lower than the previous month’s 23,232, underscores their commitment to serving the used car market.
Marshall has emerged as a significant player, securing second place with 7,845 vehicles in stock, surpassing Sytner’s 7,632 units. Evans Halshaw and Bristol Street Motors clinched the fourth and fifth positions with 7,329 and 7,282 used cars in stock, respectively. These dealerships have demonstrated their ability to navigate the challenges posed by fluctuating inventory levels.
Online Disruptors Continue to Make Waves
In the era of online car buying, disruptors like Cinch and Cazoo continue to influence the market. Cinch maintained its position in ninth place with 6,172 vehicles in stock. Meanwhile, Cazoo rose one place to 12th, boasting 3,926 cars in stock. Their ability to adapt and thrive in a rapidly evolving market underscores the significance of online platforms in the used car sales landscape.
Why are dealerships struggling to obtain new stock in the second-hand car market?
The challenges dealerships face in obtaining stock of second-hand cars can be traced back to a series of interconnected factors, primarily stemming from the cascading effects of disruptions in new car supplies. Here’s an in-depth exploration of the reasons behind this predicament:
- New Car Shortages Cascade to the Used Car Market: The crux of the issue lies in the fact that shortages in new car supplies have both a direct and domino-like impact on the used car market. When new car production faces disruptions, it leads to a scarcity of near-new used cars, typically in the 1–3-year-old category. This ripple effect creates a vacuum in the used car market, as consumers seek out these relatively young vehicles.
- High Demand Meets Low Stock: The confluence of these disruptions has resulted in a dual challenge for used car retailers – soaring consumer demand and dwindling stock. The combination of high demand and low inventory levels exerts upward pressure on used car prices. As a result, used car prices have reached record levels, putting financial strain on both dealerships and consumers.
- Prolonged Disruptions in New Car Production: The root cause of these disruptions lies in the extensive interruptions to new car production over the past two years. Initially, the automotive industry grappled with factory closures due to the COVID-19 pandemic. Subsequently, supply chain issues and semiconductor shortages further exacerbated the problem. These combined challenges have led to a lack of new cars entering the marketplace.
- Extended Period of Reduced New Car Production: Projections indicate that new car production may not fully return to near-normal levels until the end of the current year. This means that the automotive industry faces nearly three years of reduced new car production from the start of these disruptions. Consequently, the supply-demand imbalance in the used car market will likely persist well into Q4 2023.
- Implications for Dealerships and Consumers: Dealerships find themselves in a tough spot as they must navigate the delicate balance between high prices and consumer expectations. While the current situation has allowed some dealerships to command higher prices for their existing inventory, it has also posed challenges in restocking their lots. Conversely, consumers are grappling with increased costs when purchasing used cars, potentially impacting their buying decisions.
Outlook
The struggles dealerships face in obtaining second-hand car stock result from a prolonged and complex set of disruptions in the new car production ecosystem. These disruptions, stemming from factors such as the COVID-19 pandemic and semiconductor shortages, have created a supply-demand gap that will likely persist, shaping the dynamics of the used car market well into 2023. Dealerships and consumers must adapt to this evolving landscape, emphasising strategic inventory management and informed purchasing decisions.
The UK used car market remains a dynamic and ever-changing arena. Dealerships face challenges in sourcing new stock, but the sector has displayed remarkable resilience, leading to steady growth in sales and revenue. As senior stakeholders, it’s crucial to stay tuned to these trends, adapt to the evolving market dynamics, and continue serving the diverse needs of your customers.
As the winds of change continue to shape the used car market, having a reliable partner by your side is essential. We’ve harnessed over 50 years of industry experience at Marsh Finance to provide tailored car finance solutions for dealerships and their valued customers. If you’re seeking a trusted ally with a proven track record and unique offerings like non-prime PCP, now is the time to explore how Marsh Finance can elevate your dealership’s success. Discover the benefits of partnering with us today, and let’s navigate this road ahead together.