Car dealer survey shows effect of downturn on used car activity

New research conducted by Manheim Retail Services during December 2008 has revealed the true impact of the recession on dealers’ used car sales. Questioning a broad cross-section of mixed franchise retail dealers who use the services of Manheim subsidiary Portfolio, the survey found that more than two thirds of all dealers had experienced downturn in used car activity during 2008. The vast majority of these said that levels were down by over 10%. On the positive side, nearly a quarter confirmed that sales had remained at the same level this year, with a further 12% saying they had seen used car sales actually rise.

Reflecting the current economic difficulties, the results also showed that dealers were either unable or reluctant to invest in used car stock with more than half confirming that they had reduced their stock levels. Conversely, an indication of how some dealers are approaching used car activity was that more than a quarter said they had maintained the same levels of retail stock, whilst 20% of those questioned said that had actually invested in more stock for the forecourt.

Further detailed investigation revealed that dealers had been actively changing the profile of retail stock. Tellingly, three quarters of dealers said they had adopted policies of lowering the average value of vehicles on display, with 46% confirming that they had reduced stocks of larger fuel-hungry Executive cars and 37% said they were shying away from 4x4s. Not surprisingly, the survey revealed that 63% of dealers were stocking more super-minis and small hatchbacks whist 29% also confirmed that they had increased their stocks of medium-family cars.

Turning to the marketing and promotion of used cars, Manheim Retail Services said the results showed that dealers seemed to be taking differing approaches to tackling the tough trading conditions. As expected, a sizeable proportion - 38% - said that they had tightened their belts in 2008 and reduced their used car marketing spend.

On the other hand, a third confirmed that they saw used cars as a life blood to their dealerships and had increased the marketing spend by up to 10%, with a further 4% saying it was up by over 10%.

Looking at marketing strategies in 2009, the survey clearly showed that dealers are very focussed on the best ways of generating retail interest. Bad news here for newspaper advertising with 63% of dealers indicating they intended to reduce advertising in this media channel with 26% confirming that they would be cutting back on local radio and TV advertising. Conversely, more than two thirds of all dealers questioned reported that they would invest more in online promotion and a further 46% were positive about increasing direct marketing spend on used cars.

Commenting on the results John Simpson, Managing Director of Manheim Retail Services said, “The survey confirms pretty much what we felt was happening but it’s good to see it crystallised so clearly. Perhaps the most interesting insight of all is that dealers seemed to be split in their strategic approach to used car retailing. Many are doing what seems natural in hard times and cutting back where they can and yet others are taking a more aggressive stance. These dealers are investing more in a market where there is still healthy demand and certainly profits to be made, providing stocks, values and customers are managed very carefully.”