Prices for used cars are 77.5% higher than they were at the onset of the Covid-19 pandemic in March 2020, according to data from DoneDeal
It sounds great, and for many dealers, used cars have been very profitable as the sector bounced back from Covid. However, the 77.5% figure is not reflected in the increased profit because the supply of used cars has not kept up with demand by a significant margin, and sourcing used stock, especially in the new – 5 year range, has been an increasing problem.
The why for the stock shortage is clear; the drop in new car sales over the last three years.
Q1 has seen a small (5.3%) increase in the supply of used cars, but more is needed to keep up with demand. Anecdotally and very evidently from my visits to dealers, many are opting to stock older cars than they would retail traditionally. They recognise these will often require extra reconditioning work and longer warranties. In the face of strong demand and in light of used car inflation, the affordability of such older stock makes this strategy very appropriate for many.
The problem of sourcing used stock is also an issue in the key UK supply chain. Used car imports to Ireland were down 53.5% in the first three months of 2023 compared to the first three months of 2019. The share of used cars imported from the UK fell to a new low of 32.7%, compared to Q1 of 2020, when the share of all imported used cars from the UK was 93.6%.
All of this points to an ever ageing car park, and it is not helped by falling levels of part exchanges as car owners seek to cash in on used car inflation by selling their cars privately or using used car buying aggregators.
The challenge will not be going away any time soon. So how are the dealer community responding? I welcome feedback from dealers, large and small.
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