Despite 2020 being a challenging year for the car industry, with new car sales suffering their worst year in nearly three decades, a glimmer of hope shone through the Covid cloud. The used car sector staged an impressive comeback after the first lockdown – bouncing back from a 74.2% plunge in April to a drop of just 17.5% in June.
So, what are the main factors driving the used car industry, and are they here to stay? We take a look at the top five trends.
1. Drivers eye up affordability
Due to new car supply issues in spring 2020, the focus moved to selling used vehicles – giving buyers more choice. Luckily, this went hand-in-hand with consumer habits, since drivers set their sights on affordability – as we found in our top 10 used models of 2020. The financial impact of the pandemic has been felt by many, so we expect this consumer trend to continue into 2021, giving dealers more opportunities to shine in the used car department.
2. The flight from public transport
The summer ‘mini-boom’ in used car sales was partially driven by concerns over the risk of COVID-19 spreading on public transport. The idea of a car being a ‘safe space’ presented dealers with exciting new marketing opportunities – after all, big purchases are often driven by emotional factors! Used cars certainly benefited from this demand, as people sought an affordable entry point into car commuting.
Fast-forward to when we emerge from the third national lockdown – do you expect to see this trend continue to make an impact, or do you think the majority of concerned train-and-bus commuters have already jumped ship?
3. Young money
As well as prompting seasoned commuters to rethink how they travel, the pandemic also led younger people to review their options for joining the rat race. Auto Trader reported a sharp year-on-year increase of 18-to-24-year-olds looking at cars on their website, while driving school RED also announced a huge jump in demand. Hopefully this interest from a younger audience continues into 2021, as ‘new’ 17-year-olds choose getting their provisional licence over a train pass. 18-to-24-year-olds are also more likely to purchase a used car more than five years old – food for thought!
4. The digital opportunity
Digital retailing and ‘virtual’ services have accelerated, with dealers rolling out sophisticated e-commerce platforms to connect with customers at home. With high-quality images and video walkarounds, detailed condition reports, integrated communication tools, click-and-collect and home delivery options, this digital offering gave buyers more confidence in buying cars – new and used – from the comfort and safety of their home. According to data from the NFDA, during the first two weeks following the initial lockdown, 55% of dealers saw an increase in online used car sales, rising to an impressive 74% in August.
5. Used cars: already ‘on the up’?
Last but not least, did you know that pre-Covid, there were already signs of the used car market picking up, after three years of decline? The SMMT reported the strongest performances in November and December 2019 since the same months in 2016. What’s more, Car Dealer magazine has predicted that more used car dealers will appear in their next Top 100 (the recently published 2020 list is based on pre-Covid figures – but has already seen a used car operation reach number 7 on the list). Do you think that the used car market was already ‘on the up’ and the pandemic only served to sharpen the focus, or do you think other factors played a bigger role?
Going into 2021, it’s clear that the used car market is more important than ever. The above trends – some triggered, some accelerated by Covid – came to the fore in 2020 and, going into 2021, it will be interesting to see which will continue to play out.
There’s optimism for continued recovery – looking back to Q3, two-thirds of dealers told Cox Automotive they expected used car transactions to increase in 2021. Interestingly, 36% also said they expected supply to decrease, and this is likely to be a key challenge for dealers in 2021, as challenges to the new car market make themselves felt in the used car realm.
But it’s true that out of challenge comes opportunity – and savvy dealers are looking to stay ahead of the game, changing up their stock sources in order to access the most desirable, high-quality models with the best margins. Having the data you need to support your instincts in finding the best preowned car stock for your forecourt could give you the edge!