06 Sep 2022
Eighty-five per cent of dealers say that October’s energy price cap increase – if implemented – would drive down used car prices and values in Q4 of 2022, research from September’s Startline Used Car Tracker shows.
Of these, 28% predict the adjustment will be “small” and 42% “moderate” – but 30% believe that a “significant” impact is likely.
Additionally, 95% say that if Ofgem’s recommendation was carried out, it would negatively affect the overall used car market in Q4, with 60% believing that most car buyers will have less to spend, 35% that there will be a general loss in consumer confidence and 5% that supply is finally starting to exceed demand.
Paul Burgess, CEO at Startline Motor Finance, said: “If implemented, the energy price cap increase would be just the latest in a line of economic shocks that mean personal finances are coming under more pressure than at any time since the 2008 financial crisis and perhaps longer. It is no surprise that dealers believe that this will affect used car values and prices but it is perhaps more a matter of concern that almost a third believe we are likely to see a significant adjustment.
“Our own view is that the market is likely to remain relatively stable. Certainly, while supply remains as constrained as it has been in recent months, we don’t foresee it being outstripped by demand, even if the latter suffers quite a bump. Some kind of downgrading of prices and values is possible or even probable but is likely to be limited.”
Further dealer caution is visible in Startline’s research when looking at the challenges they say are likely to affect the future retailing of used cars. While stock availability remains the top factor in September, it is down to 65% from 77% in August, and a reduction in desire for car ownership has moved into second place - up significantly to 42% from 18%.
Paul said: “This is quite an interesting point from the Tracker research. We are hearing some anecdotal feedback in the market that families who previously owned two cars are making savings by cutting back to one. Plus, there are undoubtedly some people who are selling their only car, faced with spiralling living costs. All of this would explain why dealers feel, in the current climate, that there are simply fewer people who want to own a car. However, these are probably quite small numbers, otherwise the trend would be more visible.”
However, despite all of these concerns, overall optimism among dealers is increasing. When asked whether they felt more optimistic or pessimistic about the used car market than last month, optimism is markedly up at 24% compared to 12% in August, while pessimistic is 32%, down from 40%.
Among those who were optimistic, the top factor is that stock supply is strengthening, named by 62% of dealers while, for those feeling pessimistic, 89% say that consumer confidence is falling.
Paul said: “This increase in optimism might seem a little contradictory given the fact that dealers in our research are clearly concerned about the emerging economic picture but the fact is that trading over the summer months has remained strong and, perhaps more pertinently, the used car market has proven remarkably resilient in recent years.
“Even if we are entering a period of adjustment, it is perhaps likely that dealers who have successfully adapted their businesses to thrive during the pandemic and then through unprecedented supply issues feel they are equipped to deal with almost anything. They may have to cut costs, make changes to the vehicles they stock, the customers they target, their sales channels and more, but they are confident in their own abilities to handle change.”
The Startline Used Car Tracker is compiled for Startline Motor Finance by APD Global Research, well-known in the motor industry for their business intelligence reporting and customer experience programs. This month, 300 consumers and 55 dealers were questioned.
Founded nine years ago, Startline is a flexible motor finance specialist and employs 170 people at its Glasgow headquarters. It works with around half of the UK’s top 50 franchise dealers by turnover as well as 70% of the top 50 independent car retailers, and currently accounts for more than 2% of the UK used car motor finance sector by volume.
About the Startline Used Car Tracker
The Startline Used Car Tracker was launched in April 2022 to produce essential attitudinal data about the used car sector over time. Each month, it asks consumers about their propensity to buy, fuel choices and the factors that will affect used car purchases, as well as questioning dealers about their feelings regarding the prospects of the market, the challenges facing them and their online offering.
The research is carried out for Startline by APD Global Research, well known in the motor industry for their business intelligence reporting and customer experience programs.
About Startline Motor Finance
Founded in 2014, Startline is one of the UK’s leading motor finance companies, providing flexible solutions to around half of the top 50 franchise dealers and 70% of the top 50 independent car retailers measured by turnover, as well as accounting for more than 2% of the motor finance market by volume.
It aims to deliver market-defining levels of customer service, compliance, innovation and insight. The company is headquartered in Glasgow where it employs more than 170 people and has a comprehensive sales presence throughout the whole of the UK.