The UK recorded its best ever second quarter for the used car market as the nation emerged from lockdown, according to figures from the Society of Motor Manufacturers and Traders (SMMT), although while auto finance volumes remain healthy, they are starting to ease after a post-pandemic surge.
SMMT data shows the used car market grew 108.6% in the second quarter of 2021 with 2,167,504 vehicles changing hands, up 6.6% on 2019 pre-pandemic levels. The association said the increase tracks the country’s gradual emergence from lockdown, as businesses reopened, demand for personal mobility increased and stock shortages in the new car market forced some consumers to turn to used models.
Compared to the near standstill of the economy last year, the used car market saw the biggest growth in April, up 307.4% on 2020 with 724,743 transactions in the month, and up 5.0% on pre-pandemic 2019. All months in Q2 saw significant growth, with May and June up 9.9% and 4.6% on 2019 respectively, the best performance for both months on record.
Year to date, the rebound in Q2 has pushed the used car market up 33.3% to 3,855,259 units over the first half of the year. However, this remains 4.9% down on the 2019, the equivalent of almost 200,000 units.
Demand for used battery electric (BEV) and plug-in hybrid (PHEV) vehicles continued to grow in Q2. Both BEV and PHEV transactions more than tripled in Q2 (353.9% and 349.8% respectively) to 10,903 and 16,202.
Nevertheless, at 1.3% of market share, the SMMT says the plug-in used car market is not yet seeing the acceleration of uptake as has been seen in the new car market with the number of used plug-ins changing hands in Q2 2021 comparable with the number of new plug-ins bought in Q3 2015. The scale of the challenge to transition the entire used car parc away from traditional fuels remains significant.
Petrol and diesel powertrains, meanwhile, made up 96.4% of the quarter’s used car market at 2,090,396 units. In addition, increased demand overall has led to an increase in sales of older used cars with only 12.7% of all vehicles sold being three years or under, the lowest on record.
Mike Hawes, SMMT chief executive, said: “This is welcome news for the used car market as transactions rebounded following nationwide lockdowns which closed retailers. More motorists are turning to used cars as supply shortages continue to affect the new car market, and the increased need for personal mobility with people remaining wary of public transport as they return to work. A buoyant used car market is necessary to maintain strong residual values which, in turn, supports new car transactions. We now need to see a similar rebound in new car sales to accelerate the fleet renewal necessary to deliver immediate and continuous improvements in air quality and carbon emissions.”
Finance volumes up
New figures released by the Finance & Leasing Association (FLA) show that the consumer car finance market reported growth in new business volumes of 12% in June 2021 compared with the same month in 2020. In the first half of 2021, new business volumes were 31% higher than in the same period in 2020.
The consumer new car finance market reported new business volumes up by 25% in June compared with the same month in 2020, while the value of new business grew by 29%. In the first half of 2021, new business volumes in this market were 31% higher than in the same period in 2020. The percentage of private new car sales financed by FLA members in the twelve months to June 2021 was 93.2%.
The consumer used car finance market reported new business volumes up by 6% in June compared with the same month in 2020, while the value of new business grew by 9%. In the first half of 2021, new business volumes in this market were also 31% higher than in the same period in 2020.
Commenting on the figures, Geraldine Kilkelly, director of research and chief economist at the FLA, said: “The consumer car finance market continued to report solid growth in June, but as expected growth rates are beginning to moderate. The H1 2021 results show that new business levels have recovered strongly as restrictions to deal with the pandemic have been gradually eased. The value of consumer car finance new business in H1 2021 was only 8% lower than in H1 2019.
“Our latest research suggests that the industry has maintained its optimism about the opportunities for growth despite the risks to the economic recovery from further waves of Covid-19. The FLA’s Q3 2021 industry outlook survey shows that 91% of motor finance providers expected new business growth over the next twelve months.”
According to FLA figures, total asset finance new business (primarily leasing and hire purchase) grew by 39% in June 2021 compared with the same month in 2020. In the first half of 2021, new business was 28% higher than in the same period in 2020.
The plant and machinery finance and commercial vehicle finance sectors both reported new business up by 47% in June compared with the same month in 2020. Over the same period, the business equipment finance sector reported new business growth of 34%, while new business in the IT equipment finance sector fell by 32%.