Inside the industry: used car profits fall despite supply shortage

BMW dealer forecourt 2019 closeup

Pendragon Group’s average selling price is a little under £30k

Pendragon’s used car profits dropped by an average of £491 per unit during Q3

Interesting stats in the latestfinancial report from Pendragon, the UK’s fourth-largest dealer group by turnover (just under £3 billion, since you’re asking), including some intriguing details among the headlines of yet another incredibly strong quarter of trading.

The firm operates more than 160 new and used car sites across the UK under the auspices of the Evans Halshaw, Stratstone and CarStore brands, covering a broad spread of both mainstream and premium car makers in its mix.

Across this it revealed that the average price of a new car sale was £29,036 – a headline that gives lie to the fact that all electric cars are priced beyond the means of the typical new car buyer, although as ever with averages it’s important to remember the mid-ground represents only one view of the overall picture.

Perhaps more interesting was the snapshot of new and used car profits these past months. Throughout the pandemic, car dealers (and some car makers) have been significantly insulated by the performance of each: when doors opened again after the first lockdown, new and used sales were turbocharged; when new car supply slumped, used car profits soared; and now the used car market is wobbling a little, if far from declining, new car margins are on the up.

All of that is reflected in Pendragon’s figures, with new car profits running at an average of £2597 per car, up an impressive £743 compared with the same period last year. Used car profit, in contrast, was down to £1561 per car, from £2052, representing a £491 drop, but that’s still at a historically high level if you discount what is regarded as an exceptional year in 2021.

Pendragon notes that the economic outlook “remains challenging” but is understandably buoyant given it has 20,000 customer orders banked, ready for payment on delivery as the semiconductor chip shortage eases. The recession may be long and deep as predicted, but that order bank could see Pendragon through a significant proportion of it.

Notably, too, few in the industry expect used car prices to collapse, even in the face of the cost of living crisis. Supply is still low, and perhaps lower still as we head into the period three years after the pandemic began, when many new car leases weren’t renewed. What’s more, used demand is potentially rising as impatient buyers look to skip new car waiting lists (or just pay less given current pressures). Pricing has plenty of head room, too, helped by the rapid inflation of new car prices as a result of rising raw material prices and the (likely) temporary end of the haggle in the face of parts shortages.

The business of selling cars has never been easy, has rarely been consistent and is usually teetering between good times and bad, but Pendragon’s experiences are by no means unique. Despite the hardships elsewhere, after a few years of variable fortunes, all car retailers seem to be making hay.

Source: Autocar

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