Have we reached peak demand? Or is there more to come
As we approach the September plate change, we share some of our insights into car buyer behaviour along with our latest market forecasts.
Are buyers returning to the “old normal”?
There’s no question that the COVID-19 pandemic changed consumer behaviour, with consumers having no option but to make most of their purchases online in line with government restrictions. Indeed, Q2 of 2020 saw the highest proportion of online sales as a proportion of UK retailing yet. But what is surprising is that, since restrictions have eased and bricks and mortar retailers have re-opened, there hasn’t been a return to pre-pandemic buyer behaviour. In fact, the percentage of overall retail sales attributed to online sales has only dropped by 4% and remains far above pre-pandemic levels.
This is particularly true for buyers looking to purchase their next vehicle with 61% of car buyers indicating that they would buy a car online.
We’ve also seen consumers looking to complete more of the car buying journey online. Crucially though, we still see that a majority of buyers still want in person support at some stage of their journey. Retailers therefore still have a key role to play as we move towards increasing levels of digital car buying.
Source: Auto Trader Car Buyers Tracker Mar-21
And the forecast for the automotive retail market is…
Perhaps unexpectedly, one impact of the pandemic has been a surge in car buyer demand. The reasons for this are well documented with the consumer savings made through lockdowns a major factor. But whilst this has been a boom period for retail there does remain the question as to when this demand will drop off now that restrictions have been lifted.
Whilst impossible to give a definitive date (not even our industry leading data can predict this!) we can say that we see no signs of demand dropping soon. We continue to see high lead volumes months after retailers re-opened, indicating a continuation of demand. This also suggest a longer-term behavioural shift in how consumers buy their vehicles, opting to send a lead rather than walk into a forecourt with no prior contact with the retailer.
Consumer confidence, a strong indicator of car sales, is also now above pre-pandemic levels according to the GfK Consumer Confidence Barometer, a further indication that buyer demand is here to stay.
Despite these positives in consumer behaviour, there are still challenges when it comes to new cars. Supply has been hampered by factory closures through the pandemic and, most significantly, by the ongoing and well publicised chip shortage that will continue to hamper production volumes for some time. Current industry forecasts indicate that we should see approximately 1.8 million new car registrations in 2021, ahead of the 1.63 million we saw in 2020 but still far below pre-pandemic levels.
But, with 46% of consumers who are considering a new car not willing to wait more than one month for a car, new car supply issues are having a positive impact on the used market.
With all the factors mentioned here, we therefore anticipate a strong outlook for used car sales in 2021 with our forecast indicating 8 million used car transactions this year. This would make 2021 the second highest year for used car sales on record and should demand and the current market conditions be sustained we expect that the actual figure could go beyond 8 million.
Catch up on the full webinar where our Chief Operating Officer, Catherine Faiers touched on this in more detail.
What do you think the next few months have in store for the market? Let us know in the comments.