Used cars sales decline after record first quarter
UK used car transactions skidded lower in the second quarter of 2017, mirroring the fall in new car sales.
According to the UK car industry's trade body, used cars transactions decreased 13.5% to 1.83m in the second quarter of 2017 from the massive 2.18m sales in the second quarter of the previous year.
The decline followed turbulence in the new car market and changes to Vehicle Excise Duty rates on new cars introduced in April.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, which produced the figures, said that the decline came as no surprise: “with used car sales closely mirroring what we see in the new car market, last quarter’s decline comes as no surprise".
Hawes also saw this as an opportunity to seize a "great" deals: "and with demand easing over recent months, this could offer motorists the opportunity to get some great deals".
While a 13.5% drop suggested transactions have fallen off a cliff, Alex Buttle, at car buying comparison website Motorway.co.uk, said it was necessary to noted that 2016 was a record year for used car sales.
"That rate of growth was always going to be unsustainable - particularly when you factor in Brexit being triggered, a government in shambles, the demise of diesel and the horrendous press coverage around a potential car finance bubble," he said, also pointing out that first quarter used car sales hit record levels.
The SMMT found 'superminis' remained the most popular used vehicle type in the quarter, with over 600,000 buyers accounting for 32.7% of the market.
Minis and SUV's were the only two segments to show growth by increasing 5.7% and 3.5% respectively.
Meanwhile, black took top position as most popular colour knocking of silver for used cars, while cream, white and brown were the only colours to grow in popularity, rising 18.2%, 10.6% and 5.4% respectively.
There was also a slight decrease in demand to approximately 4m sales in the first half of the year, -5% lower than the record levels seen in the first half of 2016, also due to the trend in the new car market.
Nevertheless, demand for diesel cars remained strong, while petrol sales decreased.
Looking ahead, as Brexit talks stutter forth, Hawes emphasised the need for the government to secure conditions that would maintain consumer and business confidence.
"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", Hawes said.
Buttle noted that second hand sales of diesel sales were remaining relatively steady, when it might be expected to see motorists fleeing to petrol cars in their droves with the impending new tax on diesel vehicles.
"We think this is because there are now better deals than ever available on diesel cars. We have already seen diesel prices falling, providing a fantastic opportunity for cash-strapped car buyers to purchase a diesel car at a discount. This phenomenon could explain why recent sales figures for diesel cars are remaining perky," he said.
"Households will be less confident about taking on more debt and buying new when household finances are already being squeezed. And we are likely to see people rein in their spending until they have a better idea of how Brexit is going to impact their income. So while the new car market is going to continue to stutter for the rest of the year, we could still see the used car market surging as people switch from new to second-hand motors.”
Graham Hill, of the National Association of Commercial Finance Brokers, said consumers might also be putting off purchases of used cars as they wait for September's new plate registration, which he said normally sees a glut of part-exchange cars hit the forecourts with an inevitable price drop.
"With such a sharp downturn though, you have to consider whether the negative narrative around car finance is actually starting to impact buying confidence," he added.
"Specifically, the criticism of PCPs, which consumers use to fund both new and used cars, is becoming increasingly widespread and misplaced - and could be driving this slump in activity. While the FCA is right to be looking into the dubious selling practices of certain dealerships, car finance products are robust routes to car ownership. It's the lack of transparency around what these deals actually entail that really needs to be investigated."