Demand for used cars has remained firm despite inflationary pressures and rising interest rates, says Auto Trader boss Nathan Coe.
Speaking to Car Dealer for a special video interview (above), the advertising marketplace’s chief executive officer said despite the cost of living crisis, consumers are still shopping for used cars.
Coe explained that Auto Trader’s platforms saw 14 per cent more consumers searching for used cars this summer than they did last year.
He said: ‘Demand is holding up very, very well, which some people might be surprised about as we have seen consumer confidence dented with many of us paying a lot higher interest rates on mortgages and the cost of everything has gone up.
‘But actually, we had just over 14 per cent more people on Auto Trader in August than we had last August, and that was already busy. So demand feels really good.’
Coe said when he speaks to car dealers they currently report a mixed picture in terms of sales performance and many are now trading older used cars than they have in the past.
This has come as result of a reduced supply of nearly new vehicles after the production issues the industry has faced in the last few years.
In fact, many experts believe the knock on impacts of those fewer new car sales during Covid could actually cause used car prices to rise next year again.
Coe said the dealers that usually specialise in selling younger used cars are ‘having a tough time’ as the supply of these vehicles simply isn’t there – but the dip has not come because demand from buyers has waned.
He added: ‘Dealers tend to be trading in older cars than what they’re used to. That means it requires more prep and sometimes they’re waiting on parts. So while some parts of the market are healthy, even it has its challenges.
‘The vast majority of the market is still looking pretty good. The reality is, for most consumers, when we speak to them, some 85 per cent are saying they still feel good about the affordability of their next car.
‘We don’t typically see consumers treating cars as a discretionary purchase.’
Coe explained he was ‘disappointed’ with the government’s decision to delay the ban on petrol and diesel sales from 2030 to 2035.
PM Rishi Sunak recently announced that the ban will be delayed, leading to a mixed reaction from the industry, including the car dealers we spoke to.
Coe said: ‘I’ll be careful in terms of saying I’d be shocked when politicians change their position on what you would have thought were pretty landmark policies – but I think it’s disappointing.
‘The problem with something like that is I don’t think it takes account of the manufacturers. It feels as though it’s a consumer driven thing and it’s definitely something that’s trying to endear the public to the current political party.
‘Moving the ban back only makes a transition that is definitely going to happen slower. And for most manufacturers, they’re already so far down the planning route.’
Coe said that as the used car market becomes harder to predict, car dealers need to pay close attention to data sources to give them an edge.
He highlighted the EV market where some cars have fallen out of favour and others, as their prices have dropped, have fallen back in favour with buyers.
Coe added: ‘EV market health, which is our measure of the balance between supply and demand, is negative 40 per cent, which sounds quite grim.
‘But there are certain vehicles within that like the ID.4, or Nissan Leaf, which are actually positive 40 per cent and will make for great trading.
‘So, interestingly, it’s not broad trends, it’s actually about getting underneath the broad trends to make sure that dealers can trade well.’
Looking ahead to next year, Coe warned that dealers will have to get used to a more normal market where volumes will rise and margins will fall.
He added: ‘We’ve had a market where transaction volumes have been low, but dealers have been doing just fine, because if transaction volumes are down five, or 10 per cent, but your gross margins are up 20, 30, 40, 50 per cent, then you’re absolutely happy because you’re doing less work and making more profit.
‘As we move into next year, we are going to move back to a world that some of us may have forgotten, which is where you still have to work really hard for one deal.
‘Also we won’t be in such an under-supplied market, and that is going to put pressure on margins, because margins are still, generally speaking, running at levels that are well ahead of anything any retailer would expect in a more normal market.’
You can watch the full interview in the video at the top of this post.