Cars and vans prepared for auction

Smaller dealers exit sub-£1,500 used car market

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Small independent franchised dealers are moving away from the sub-£1,500 used car market, according to a survey by Cap Hpi.

The organisation asked dealers how the market is performing for cars priced under £1,500. Over 60% said they had ceased dealing in that sector, and 18% indicated it was tough.
The Consumer Rights Act could be giving dealers cause for concern and moving them away from selling these cars, explained Philip Nothard, retail and consumer specialist at Cap Hpi.

Overall, dealers have reported tougher trading in April and May and it is clear uncertainty in the economy is diminishing confidence, Nothard said.

For May, more than half of dealers surveyed reported a decline in physical footfall, while another 20% said they had experienced little or no change.

Buying a new carOnline activity generally performed more positively than footfall, with 23% experiencing an increase compared to April, and less than half seeing a decline.

Looking at the profit made on sales, just over half of the dealers surveyed reported that retained margins had remained the same since April, and 5% saw an increase. However, the remainder experienced further compression.

Finance penetration has seen little change over the course of this year, but in May 33% of dealers surveyed said they had experienced a decline since the previous month, while those reporting increases reduced to 13%.

Almost half of dealers reported similar levels of stock availability compared to April, and another 30% said that availability had improved.

The survey also asked dealers about current trade values. Just under half felt that the current trade values reflected the market, while 45% felt they were too high and a minority reported they were too low.

Reflecting the uncertainty in the economy, many dealers found that retail demand eased in May with 46% saying it had worsened since April. However, 15% saw positive improvement and the remainder reported no change.

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