Dealer profitability boosted by used car sales in 2018

After a difficult 2017 which saw UK motor retailers making an average £400 loss, dealer profitability specialist ASE recently released figures that show retailers made an average profit of £2,900 in 2018, news welcomed by the motor industry.

New versus old cars

Much of the profit made by car retailers was thanks to used car sales, which increased 0.11% year on year (between December 2017 and December 2018). Not only did used car sales increase, but they outsold new cars by just under 50%. However, this doesn’t mean that new car sales were slow: approximately 200,000 people a month bought or leased a new car in 2018.

Overall, this presents a fairly positive picture for the sector, one which looks like it may continue – at least through early 2019 – as dealers make delayed WLTP sales.

The impact of WLTP on sales

Worldwide Harmonised Light Vehicle Test Procedures, or WLTP, were introduced in September 2018 across Europe. They are a new standard of emissions testing, one that is much tougher than previous tests. Following the introduction of WLTP, car sales saw a significant decrease, with some manufacturers, including Volkswagen, struggling to get their cars WLTP ready.

According to AES, this drop in sales was short-lived, with most retailers making up for any shortfall during December. Longer-term WLTP could negatively impact the sale of diesel cars, while positively influencing the sale of electric and hybrid cars.
WLTP may also impact the tax band a car falls into, something car buyers should be aware of along with those responsible for managing their company car process. To check whether your insurance is affected too, speak to your motor trade insurance provider, or industry experts such as quotemetoday.co.uk, who can provide you with more detail.

The impact of Brexit

The other major issue potentially facing the industry in 2019 is Brexit, and the uncertainty surrounding whether we will leave the European Union with or without a deal on 29th March, or whether negotiations will be extended. Already, some car companies have announced plans to move manufacturing overseas, while others have voiced their concerns with the lack of a clear plan. Whatever the outcome, it is clear that the motor industry will need to respond to a changing environment in order to continue to thrive.

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