UK used car market follows new vehicle sales with Q2 decline
17 August 2017
17 August 2017
According to the latest data released by the Society of Motor Manufacturers and Traders (SMMT), the UK’s used car market declined in the second quarter of 2017, following record results in the previous year.
The figures suggest that 1,832,400 used vehicles changed hands during the period between April and June 2017, a drop of 13.5%. The society puts this down to the strong results of Q2 2016 being hard to match and turbulence in the new car market following the introduction of new vehicle excise duty (VED) rates introduced in the country on 1 April. This follows the trend of UK new car sales, which experienced another drop in August 2017.
Overall, for the first half of the year, the number of used car sales fell by 5.1%, with 3,966,356 sales in total. Most of this drop was seen in the petrol market, which declined by 5.1%, whereas the diesel market, which has been much maligned in recent months and will soon see the introduction of manufacturer-backed trade-in incentives in the UK, only declined by 0.1% year on year in the first half of 2017. Demand for alternatively fuelled vehicles (AFVs) rose 24.2% with electric cars enjoying particularly strong growth – up 79.3%. However, volumes remain low with AFVs currently accounting for just 1.2% of the used car market.
Mike Hawes, SMMT chief executive, comments: ′With used car sales closely mirroring what we see in the new car market, last quarter’s decline comes as no surprise – and with demand easing over recent months, this could offer motorists the opportunity to get some great deals. However, although the market remains at an exceptionally high level, given the softening we’ve seen in registrations of new cars in more recent months, looking ahead it is vital that government secures the conditions that will maintain consumer and business confidence if we are to see both markets continue to prosper.’
The results also revealed that manufacturer Ford retains its grip on the UK used car market, with the Fiesta and Focus topping the sales charts for Q2, followed by the Vauxhall Corsa and Astra, with the Volkswagen Golf in fifth position in the table.
Simon Benson, director of motoring services at used car website AA Cars, adds: ′We expected to see an uplift in the sales of used cars following April’s new VED rates, which have stalled transactions in the new car market for several consecutive months. In fact, the sales of used cars have closely reflected the slowdown in activity the new car market has experienced.
′The public are clearly taking talk of scrappage schemes, Clean Air Zones and the toxin tax seriously. Drivers are now questioning their purchases more widely and making more carefully considered car buying decisions than they might have in the past. However, demand for used diesel vehicles has been largely unaffected, contradicting the sharp decline in diesel registrations we’ve seen in the new car market.
′This suggests that many motorists who rely heavily on diesel – those driving frequent, long distances, for example – are choosing to purchase a second-hand vehicle instead.’
Meanwhile, a blog post on the Bank of England website has suggested that automotive lenders in the UK are increasingly vulnerable to a drop in used car prices after a surge in risky Personal Contract Purchase (PCP) loans. These are a financial arrangement where drivers make a deposit and rent a new car instead of buying it. Such deals may be susceptible should vehicle values fall significantly and lenders are left with a fleet of low-value automobiles after the contracts expire, the BOE staff said.
‘The industry continues to accumulate credit risk, predicated on the belief that used-car values will remain robust,’ BOE Agencies Division members″¯Tim Pike, Phil Eckersley and Alex Golledge said in the Bank Underground post.
The country’s Financial Conduct Authority (FCA) has already announced an investigation into the rise of PCPs and the suitability of those they are being offered to.