Positive used outlook
MANHEIM has predicted 2010 will be a positive year for used car retailers as the recovery continues.
However, it has also warned car dealers to start preparing now for future challenges in the used car market.
Weak registrations in 2008 and 2009, it explained, will limit the use car pool in 3 to 4 years’ time.
The firm has put a figure on the cost of the recession for a 7 year period starting in 2008. This, it says, will be a reduction of 5.75 million new and used car sales. This will be split 2.5 million new car sales lost, and 3.25 million used car sales.
The new car figure equals a whole year of lost car sales, says Manheim! What’s more, even by 2014, it doesn’t reckon the market will have recovered to 2006 levels.
Despite there being more used car sales lost, Manheim is more positive about the secondhand market.
‘Typically there are over three times more used car transactions in the UK each year than there are new registrations,’ explained Manheim’s Rob Barr.
‘Given that there are in excess of 6.5 million used car transactions each year in the UK, this is a significantly better position than the new car market.
‘When you look at the consequences of a serious recession, it not just about the immediacy of the downturn, but the duration of the recovery period, which can often be quite long as the markets both stabilise and then return to normality.
‘The shortage of used cars coming back into the wholesale market in 3 to 4 years will be around 300,000 to 400,000 per annum and is still only equivalent to circa 1.5 percent of the total UK car parc.
‘Therefore a very small increase in the stock turn of the car parc will increase overall transactions and more than compensate for this shortfall.’
As ever though, there’s a but. As Barr already explained, there will be fewer younger cars in the market. Car dealers are thus going to have to broaden the age and mileage parameters of their retail stock – and also proactively encourage incremental transactions from the existing car parc.
Scrappage, he adds, will generate more small cars coming to the market in 3 to 6 years’ time.
However, these changes will not be huge. ‘The more economical and environmentally efficient models, should also be favourable with considerably more stability than we’ve seen in the last two years.’