The buyer shift to used cars
The used car market has never seen anything quite like this. Since dealerships started to come out of lockdown from June, demand for used cars has chased supply with cars getting snapped up faster than anyone could have imagined.
This demand for used cars remains high which is good, but supply is under pressure and that presents challenges. Factor in the variables associated with an economy facing further lockdowns and a possible recession, and the future could seem a little volatile.
Yet even in bad times people still need personal mobility and buy used cars. We saw that a decade ago during the financial crisis, where the dealer bounce back was powered by used car sales.
We are seeing it now. For evidence, look no further than the first batch of City updates showing used sales leading the recovery of the listed franchised groups. An experience echoed by privately owned groups and the independent sector where alternative revenue stream options are limited or non-existent.
So, where is the demand coming from? This is where things start to get interesting. Along with customers who will only buy used cars, the numbers have grown with new types of buyers entering the market.
Lapsed new car buyers
The March lockdown happened during the busiest week of the busiest month of the year for franchised dealers. Buyers in the market for a shiny new 20-plate model faced a dilemma: do they join a long wait for a new car as car factories around the world cranked back into life, hold out until the September plate-change or dip their toes into the used market?
For those who could not wait, buying used became the only option. Consequently, when forecourts reopened nearly-new cars were snapped up as a result of a notable shift from new to used.
For many dealers Brexit proved to be an unexpected saviour. At the turn of the year, carmakers planning to get ahead of any possible Brexit disruption ordered higher than normal volumes of new cars to keep dealers supplied with readily accessible inventory. This proved to be a good move!
Since lockdown was lifted these vehicles have provided a welcome supply of nearly-new cars, with minimal mileage, to former new car buyers prepared to compromise on not being able to choose the precise spec for their next car.
Revenge Buyers
The Covid-19 pandemic has seen new buzzwords and phrases drop into our vocabulary; Zoom, furlough, social distancing, R-number, Test and Trace. A recent addition has been “revenge buying”; neatly encapsulating the desire to spend on a big ticket item for those feeling deprived of retail therapy.
As a result, cars (used and new) have been purchased by buyers realising a foreign summer holiday this year had become impossible because of travel and quarantine restrictions.
While this has been a welcome development for car dealers across the country, it has also added to the high levels of pent-up demand for used cars.
Commuter buyers
With places of work gradually reopening, many commuters have asked themselves whether they are prepared to share their personal space with fellow public transport users. Even allowing for social distancing rules and mandatory masks, the thought of returning to trains, buses and trams has prompted many to consider buying a used car instead.
Consequently, many dealers have seen a welcome influx of first time, or long absent, buyers on their forecourts searching for affordable cars to solve their commuting concerns.
An easy sell for dealers with older small cars on their forecourts.
Final thoughts
The arrival of all these new buyers coming into the used car market is a welcome development in these uncertain and fast changing times.
The frustration and challenge facing dealers over the coming months will be to source the stock they know will resonate with customers because supplies are limited and competition is fierce.
The September plate-change should boost the churn of used cars with a mixture of part-exchanges being retailed and high volumes of three-year-old PCP funded cars entering the used market.
In the battle for the hearts of minds of used car buyers, the winners will be those dealers able to source the right stock, pricing it to market and delivering the highest possible levels of customer satisfaction.
Now there’s a challenge!