Author:

Robin Roberts

The number of used car dealers has fallen over a quarter in a decade and this rate of closure is expected to continue and even accelerate in some areas.

That’s the conclusion of analysts at Trend Tracker who have produced a report looking at the future of the sector. They foud demand for used cars has been depressed since the beginning of the recent recession in 2008. No more used cars were sold in 2011 – 6.8 million units – than 10 years earlier in 2001.

Trend Tracker’s long-established and authoritative study of the used market shows that along with rises in operating costs, stagnation in used car demand, the influence of the internet, and changing customer preferences, have cut a swathe through used car retailers. The number of dealers selling used cars has fallen by over a quarter in a decade.

There were an estimated 11,610 sites retailing used cars in Great Britain in 2001, comprising franchised dealers, independent used car sites and used car supermarkets. Ten years later in 2011, there were 25% fewer sites. Both franchised dealers and independent used car retailers experienced a similar decline in numbers. Trend Tracker’s latest report forecasts that the number of sites retailing used cars in the UK will continue to decline with 11% of sites closing between 2012 and 2017.

Franchised dealer sites will decline in number at almost the same rate as independents. The main causes of the diminishing number of franchised dealer sites will be a shortage of working capital, a decline in solus sites as more manufacturers sanction multi-franchise dealerships, and the closure of less profitable sites by dealer groups, especially in the regions likely to experience slower growth. Used car supermarkets have grown rapidly in numbers by specialising in nearly-new, ex-fleet and pre-registered cars. However, the recent recession has apparently put further expansion on hold as plummeting new car sales created a shortage of the very stock which stimulated their past success.

Robert Macnab, Trend Tracker’s lead analyst for the report says, “In a new car market that will continue to be weak for a while, some franchised dealers will face a shortage of working capital as their showroom costs cannot be cut in line with already marginal profitability in new car sales.

“There’s likely to be some decline in single-brand sites as manufacturers sanction multi-franchise dealerships to preserve local representation. Dealer groups can be expected to close some of their least profitable sites, especially in the regions that will experience the slowest recovery from recession – Wales, the North East and the West Midlands. For some franchised dealers, used cars will not be the dependable source of higher-margin business they were with the rise in reconditioning costs associated with manufacturers’ approved used car schemes.”

It is going to become increasingly important to consider when business car managers release their vehicles into the market to maximize any returns and this should be reflected in their company car policy. You can help by keeping up to date with trends in our  business car news  reports.