The coronavirus pandemic has plunged the automobile industry into uncertainty. In the past nine months, we have witnessed tremendous fluctuation in the demand and sales of vehicles. The trends in the UK automobile market were no different.
As the UK imposed its initial lockdown in March, new vehicle registrations became nearly nonexistent. The effect of this was so adverse that one industry source, the Society for Motor Manufacturers and Traders (SMMT), claimed that car sales went down by 97% in April as compared to the same month in the previous year. It was the lowest level of sales since 1946.
There could be two primary causes for the low demand in the UK automobile industry. The first was obvious; showrooms shut down, and online car purchases weren’t very famous at that point. The other reason: motor finance lenders had closed their doors to new customers. But as the lockdown eased and showrooms reopened their doors in June, car sales went up again. Most auto dealers hoped to recover the losses of the year through the pent up demand that was inevitably created.
Swelled Demand for Used Cars in the UK automobile Industry
However, through all of this, one interesting statistic to note was the steady increase in the demand for used cars in the UK automobile industry. In May, this demand went up after Prime Minister Boris Johnson announced easing the lockdown rules. He advised residents to avoid public transport and opt for personal vehicles instead.
As a result, second-hand car dealers reported a further 3.4% rise in car sales in the first ten days of June. We have also noticed a surge in our car check services. Even with the new lockdown imposed, the interest in used cars has not diminished. The reasons behind this are easy to identify and understand.
Reasons for Improved Demand:
Firstly, the production of new cars all but halted during the first few months of the pandemic. Manufacturers shut down their factories in an attempt to keep the workforce safe. As a result, fewer new cars were made and sold. With the impending uncertainty of things along with the surge in unemployment, people began looking for cheaper alternatives to new cars.
Secondly, as the lockdown rules eased and people returned to their places of employment, many had to seek out safer alternatives to public transport. The annual RAC Report on Motoring stated that over 50% of UK’s licence owners want a car now more than they did before March. The report also revealed that 67% more people are likely to drive to work in the UK automobile industry now than they were previously.
Thirdly, most of the people who were purchasing these new cars were merely looking to add one or more vehicles to their existing ones. With more people avoiding public transport and with activities reaming to normal, more household members needed individual cars. So, instead of getting new cars which are already scarce, people are opting for cheaper used cars.
Lastly, the rise in unemployment levels due to the pandemic has made many people unable to finance their vehicles. Most car owners are now struggling to keep up with maintenance costs as well as insurance fees. Consequently, we have seen a higher influx of old cars in the market as owners are selling their vehicles to save on these costs. It makes preowned vehicles more readily available to purchase.
The increasing demand for used cars in the UK automobile industry brought about the inevitable rise in their prices. This trend became evident as soon as the production of new vehicles halted during the first lockdown. Second-hand car prices went up by 12% after April.
With the lockdown rules easing, the production of new cars has resumed. The increased number of new vehicles in the UK automobile market, coupled with the high prices of pre-loved cars, has led to a decrease in the demand for the latter. This change isn’t very shocking since why would anyone be willing to pay more for a used car when they could get a better deal with a new car.
By and large, the sales of preowned cars do not seem to be slowing down too drastically yet, even with the new lockdown rules in place. But, with so much unpredictability in both the job markets and the economy, there is no surefire way to foresee how this pandemic will affect UK automobile sales in the future. For now, however, used cars seem to be a preference for most people.