Motor traders will doubtless have noticed a two-speed automotive market. Our DVLA-sourced figures show used car sales made steady progress in 2014, clocking up a 1.18% year-on year increase. But the real talking point has been created by the 9.3% surge in new car registrations over the same period recorded by the SMMT.
There are a variety of reasons behind new car registrations outstripping used car sales to such an extent. First, it’s important to acknowledge the difference between a registration and a transaction. Registering a vehicle does always equate to it being ‘sold’. It’s not unknown for businesses chasing bonuses and incentives to pre-register vehicles, so it’s possible some of this distorts the figures. Used car transactions, on the other hand, indicate a sale is most likely to have taken place due to a change of vehicle keeper.
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New registrations have also been boosted by people’s evolving taste and appetite for motor finance. The number of PCPs recorded on new cars in 2014 increased by 35% year-on-year to 545,000, while the number of PCPs nearly doubled to 187,000 on used cars. However, when stripping out business sales and looking at private registrations, some manufacturers report PCPs accounting for three-quarters of their retail sales on new vehicles.
Tempting PCP deals, often supported by manufacturer incentives, have made driving a new car seem more accessible. It’s easy to see the appeal to motorists, intrigued by the prospect of driving away a quality branded vehicle for a few hundred pounds a month in some cases. This is an option particularly popular with people who don’t view ‘owning’ a vehicle as a priority and favour a manageable monthly budgeted figure and the peace of mind that comes with a new vehicle.
New cars have been made to look all the more attractive and accessible by a relative shortage of used cars in some instances. Any used car must start its life as a new car and only 1.94 million were registered in 2011, the first full calendar year since 2008 not to benefit from the Government’s car scrappage scheme. While 2012 was a little better according to SMMT’s figures, with 2.04 million registrations, the number of cars aged between two and three years old in 2014 was affected. Many older vehicles were also taken out of the market as a result of the scrappage scheme.
Our research found just 21% of the cars in the UK in the fourth quarter of 2014 were three years old or newer, while just 4.4% of these vehicles were transacted during the three months between October and December. This is lower than the average of 4.8% of cars in the UK parc transacted during this period across vehicles of all ages.
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By GlobalDataFactors outside motoring will also have played a part in the rapid increase in new car registrations. Low interest rates have had the dual benefit of reducing the incentive to save and creating attractive finance offers for people looking to purchase a car on finance.
Personal choice and commercial reality also matter: people who have held onto their car during tough economic years now feel it’s time they were treated to a new one. Buying new can also be justified with the long-term economic benefit of greater fuel efficiency, improved safety and improved technology, such as connectivity with smartphones.
Listing all these factors must make it sound like used car dealers are up against it, yet there’s also room to be positive now, and in the years to come.
People can be tempted to shift their attention from a new car by a volume manufacturer to a ‘new to you’ car by a quality brand, particularly if it’s backed up with the confidence of a provenance check and a warranty. Besides, the soaring new car registrations of today will become the used cars of tomorrow.
Andrew Ballard is strategy director at Experian Automotive
