The new appeal of older used cars
It’s time to break out the T-Cut and touch-up paint because older used cars are more desirable now than they’ve ever been before.
Models previously considered too long in the tooth for the forecourt are getting a new lease of life as a direct result of how COVID-19 is changing the way we do things.
When dealers came out of lock-down they found themselves talking to a new breed of buyer: the non-car owning consumer. While this has opened up new opportunities for dealers, these buyers are extremely cost-conscious; for them buying a car is an unbudgeted distress purchase. So cheap, cheerful, small and reliable are the deal clinchers.
The surge in demand is an understandable human reaction to the pandemic. It is best typified by those reliant on public transport viewing a run-around as a way to reduce their possible exposure to infection. Data from findandfundmycar.com shows a 35% increase in people looking for used car finance, with almost half looking at older cars under £250 a month. It seems a trusty, older, reliable run-around is the go to option for most post lockdown.
Back in June the online classifieds reported a surge in online searches for sub £10,000 cars, the sweet-spot of this market. That demand was echoed in the wholesale sector where cars that might have struggled to find a buyer before March were being snapped up, with dealers prepared to take on refurb costs because of the demand.
An online search in my local area revealed just how much you can get for £10,000. A 15-plate Vauxhall Insignia, BMW 5 Series M Sport on a 12-plate or a 2013 Mercedes-Benz A Class.
While the circa £5,000 bracket unearthed some bargains including a 2012 Volkswagen Polo, an 11-plate Toyota Prius and best of all a Mercedes-Benz CLS on a 59 plate.
Research from Indicata, the independent market analysts, showed how used car sales in the UK grew year-on-year by 3.7% in June, a remarkable achievement bearing in mind forecourts in Wales and Scotland remained closed for most of the month.
Furthermore, demand was powered by older vehicles. Sales of cars aged between 3-6 years old increased by 3.73%, while demand for those aged 6-9 years leapt a whopping 12.61%. Meanwhile demand for 0-3 year olds, typically the most desirable, fell 7.17%.
The latest Cox Automotive Dealer Sentiment Survey, showed high demand for 3-5 year old cars continuing through July. It also found 37% of dealers are increasing their mix of lower priced cars as a direct result of COVID-19. The most searched cars under £250 a month on findandfund include Ford Fiesta, Ford Focus, Volkswagen Golf, BMW 3 Series, and Audi A3. As long as it can get you from A to B, it’s evident that people are becoming less interested in having the latest model and more concerned on saving pennies in the current climate.
We are living in different times. The cyclical ebb and flow of supply and demand can not necessarily be relied upon to track typical seasonal trends.
Consequently, this new norm is forcing dealers to make adjustments to the way they operate in terms of what they stock and how they source it.
Dealers who previously would not have considered buying stock unseen online are now doing so because auction halls have not re-opened. The feedback I’m hearing from the wholesale sector is that many are enjoying this new immediacy and convenience. Although the warts and all accuracy of condition reports will play a key factor when buying older stock, when kicking tyres and lifting bonnets is not an option.
With used stock in short supply, dealers are adapting to selling fewer units but with increased margin. This has resulted in part-exchanges taking on a new role.
Previously older trade-ins would have been automatically dispatched to auction, especially in the franchised world. But this is no longer the case. If an older cars can be refurbed in-house, sold with a warranty and still make a margin, then dealers will hold on to it rather than let it fill a space on someone else’s forecourt.
The coronavirus is not going away. The economy is in recession. UK employment has fallen by the largest amount in over a decade with further job losses likely to follow the ending of the furlough scheme in October.
These challenges will shape trading in the short to medium term. But in these uncertain times, one thing is for sure, they will also continue to drive demand for reasonably priced older used cars as the obvious trend on findandfund has proven. For many dealers this will provide an invaluable lifeline and help to inform their stocking requirements in the months to come.