Growth Statistics of Used Car Dealerships in the UK
The UK’s used car market has been booming, and it’s no secret why.
With the rising cost of living, consumers are looking for more cost-effective ways to own a vehicle, and buying second-hand is an obvious choice.
For many, purchasing a brand-new car just isn’t feasible, and dealerships have adapted to meet this growing demand.
But how exactly has this affected the growth of used car dealerships in the UK?
Growth Statistics of Used Car Dealerships
Let's dive into the numbers to get a clearer picture.
Table of contents
The Growing Demand for Used Cars in the UK
In recent years, the used car market has grown significantly. According to the Society of Motor Manufacturers and Traders (SMMT), the UK used car transactions market grew by 5.1% in 2023, with over 7 million transactions,
While traditional fuel types like petrol and diesel dominated with a 94.3% market share, sales of electric vehicles (EVs) saw notable growth, almost doubling by 90.9% compared to 2022, though they still only account for 1.6% of the market. More and more buyers are turning to used vehicles as a smarter financial option.
Post-Pandemic Demand: During the COVID-19 pandemic, supply chain issues led to a shortage of new cars, pushing consumers towards second-hand vehicles. While the new car supply has somewhat recovered, the preference for used cars has remained.
Inflation Pressures: With inflation driving up the cost of living, more consumers are looking for affordable transportation options. Used cars offer a practical alternative to new ones, particularly for those seeking value for money.
Why Used Car Dealerships Are Thriving
As more consumers choose pre-owned cars, dealerships have expanded their operations to meet demand. But it’s not just the demand for cheaper vehicles that are driving growth; there are several other reasons why used car dealerships are thriving in the UK.
Greater Variety for Buyers
Unlike the new car market, where buyers are limited to the latest models, the used car market offers a wide range of vehicles at various price points. From affordable runarounds to high-end luxury cars, the options are endless, which is attractive to buyers looking for specific makes and models within their budget.
Increased Consumer Confidence
There used to be a stigma around buying used cars, but that’s quickly changing. Thanks to better warranties, certifications, and clearer vehicle histories, consumers feel more confident purchasing pre-owned vehicles. This has led to a shift in consumer behaviour, with more people actively considering used cars as their first option.
Growing Online Presence
The internet has revolutionized the way people shop for cars. Platforms like Autotrader, Cazoo, and others have made it easier for consumers to browse used cars, compare prices, and even complete purchases online. This digital shift has opened up new opportunities for dealerships to reach customers, driving further growth.
Shifts in Buyer Preferences: What’s Fueling the Market?
One of the key factors behind the growing market is changing buyer preferences.
Let’s look at some of the shifts driving growth:
Focus on Sustainability: As concerns about climate change grow, more buyers are opting for electric and hybrid vehicles. While new electric cars can be expensive, the second-hand market offers more affordable options. Used car dealerships are responding by increasing their inventory of eco-friendly vehicles.
Cost-Conscious Consumers: Rising living costs mean that more consumers are looking for value, and used cars are an obvious choice. Many drivers are realizing they can get a nearly-new vehicle for a fraction of the price, leading to a surge in second-hand sales.
Preference for Larger Vehicles: Interestingly, there’s been a notable increase in demand for SUVs and crossovers in the used car market. These vehicles offer more space and versatility, appealing to families and those looking for more bang for their buck.
Financial Growth: How Dealerships Are Profiting
The growth of the used car market isn’t just about more sales; dealerships are also seeing higher profits. Why? Here are some reasons:
Higher Margins on Used Cars
Unlike new cars, where pricing is often controlled by manufacturers, used cars offer dealerships more flexibility. They can buy vehicles at auctions, refurbish them, and sell them at a markup. This flexibility in pricing allows for higher profit margins compared to new car sales.
Demand for Finance Options
As the price of used cars rises, so does the demand for finance. Dealerships are increasingly offering financing options, giving buyers more flexibility in their purchases. This not only attracts more customers but also allows dealerships to make additional profits through interest on financing agreements.
Add-On Services
To maximize profits, many dealerships are offering add-on services like extended warranties, insurance, and maintenance packages. These extra services provide dealerships with additional revenue streams, further boosting their financial growth.
Challenges Faced by Used Car Dealerships
While the growth of used car dealerships in the UK is impressive, it’s not without its challenges. Here are a few potential obstacles that could impact future growth:
Supply Chain Issues: While demand is high, supply issues are still a concern for dealerships. As the market for new cars recovers, it could reduce the flow of quality used cars, making it harder for dealerships to stock the right vehicles.
Changing Emissions Regulations: With the UK government pushing towards zero emissions, used car dealerships may face new challenges, particularly when it comes to selling older petrol and diesel vehicles. More stringent emissions regulations could make it harder to shift certain types of cars, especially those that don’t meet upcoming standards.
Competition from Direct Sellers: Online platforms and direct-to-consumer models, such as those offered by Cazoo, are putting pressure on traditional dealerships. Consumers are becoming more comfortable with purchasing cars online, which may limit foot traffic to physical dealerships.
The Future of Used Car Dealerships in the UK
The used car market shows no signs of slowing down. In fact, industry experts predict that demand will continue to grow as consumers look for affordable and reliable transportation.
To stay competitive, dealerships will need to adapt to changing consumer preferences and continue to invest in digital platforms that make the buying process easier and more convenient.
Additionally, as more eco-friendly vehicles enter the second-hand market, dealerships will have to cater to buyers looking for electric and hybrid options. The future is bright for those dealerships that can stay ahead of these trends, offering the variety, convenience, and financial flexibility that modern buyers demand.
Conclusion
In summary, the used car dealership market in the UK is on the rise, with more buyers opting for affordable and reliable vehicles. With shifts like the growing popularity of electric cars and changing customer demands, staying ahead means being adaptable.
At Rhombus Accounting, we’re here to support your business through these changes, helping you stay on top of your finances, VAT Margin Scheme requirements, and everything in between.
Meet Lewis
Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.
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