Are accelerating used car sales really such good news?

Figures published earlier this month by the Society of Motor Manufacturers and Traders (SMMT) show that the number of used cars being sold is on the increase. But is the return to growth all good news?

More than 2 million used cars were sold in the UK during the third quarter of 2020. These figures represented an increase of 4.4 per cent – or almost 100,000 sales – compared to the same quarter last year. This made July to September this year the busiest quarter since the end of 2016.

The reverse in declining user car sales was welcomed as encouraging news by many voices in the automotive sector. However, an “under the bonnet” investigation behind the figures might raise a few question marks over just how encouraging these figures actually are.

The revving-up of online players, such as Cinch and Cazoo, may have been one factor behind the figures. These new services appear to have benefitted from a shift in attitudes towards buying used cars over the internet, a trend accelerated by Covid.

However, a number of panellists attending the recent Shoosmiths webinar, ‘The New How: The road ahead for mobility & infrastructure’ (recording available here: https://www.shoosmiths.co.uk/insights/comment/the-new-how---road-ahead-for-mobility-infrastructure), suggested that the government’s advice to steer-clear of public transport during the Covid pandemic and the rise in home working could be key factors behind the figures. 

They suggested that the government’s advice was driving consumers – especially younger people – to buy low-value used cars as a safer way to commute. They also spotted 2 other trends: that used car buyers were not replacing their existing car, but adding a second or third model as a cheap runaround; and that consumers were happy to buy cheaper, older cars as they were making fewer journeys due to the working from home phenomenon. 

If used car buyers are shunning more expensive models, the figures could start to look less rosy from an economic perspective. This will be especially the case if such sales push potential purchases of new cars further down the consumer’s agenda. 

Further, if consumers are buying more, lower-value, older cars, many will be concerned that the prolonged presence of pollution-heavy models doesn’t exactly put the UK on the road to decarbonisation.

Are the figures a false positive for the automotive industry? The figures look good in terms of numbers, but there may not be as much new money being injected into the market as the numbers suggest.