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- What's new on the used car market? Rise of AI & SUV sales in Europe
What's new on the used car market? Rise of AI & SUV sales in Europe
Inflation, digitalization and everything else traders and private customers need to know about the 2023 used car market with a forecast for 2024.
Staying aware of what’s happening on the used car market is the best way to ensure you’re making the right business decisions and serving your customers the best you can. And as far as this year is concerned, there have been ups and down.
As the last quarter of 2023 approaches, the situation keeps improving so read on to find out what’s going on with the 2023 used car market and what you can expect in 2024. We’re brining you a thorough analysis as well as some predictions that may surprise you.
SUVs Are The Star of the 2023 Used Car Market
There are some very good signals to watch out for in the current used car market. Supply chain issues, which have been hurting the sector since the pandemic have finally started to ease down. Also, car sales are up, indicating some healthy movement in this market.
One surprising piece of news is that the main star of this recovery and growth in the European market is none other than SUVs. The sales of these vehicles have been exploding in 2023 and SUVs now hold more than half of the market share of newly registered cars in Europe.
Illustration: eCarsTrade / Data: JATO
This is actually unprecedented in Europe where SUVs have historically been considered less popular due to their size which made them impractical for the often narrow streets and small parking spaces of European cities. If you think about it, you can probably picture a grand SUV much easier in the bigger streets of US cities than those of Rome or Paris.
Nevertheless, the comfort, safety, and ruggedness of these vehicles (which makes them perfect for outdoor activities and nature trips Europeans are fond of) have finally made an impression on buyers here.
But why would new car registrations interest you, as a player in the used segment of the market? Well, as you know, an increase in interest in the new car market resonates through the used car market as well.
Even more importantly, in the beginning of this section we mentioned that supply chains issues have eased, but that doesn’t mean they’re completely gone. And with demand for SUVs this high, it’s realistic to expect that many buyers will be turned away by higher pricing and longer waiting times for new vehicles.
Instead, they might opt for younger, used models, opening up many opportunities for used car dealers to profit from this SUV trend.
To sum up, SUVs are in this season and it’s the right time to invest more heavily into this car category. Will you stay ahead of the curve or play it safe with the smaller European classics?
What’s Happening on the New and Used Car Markets?
Inflation and the slowdown in production in the last few years has meant rising prices for new cars. However, over the last months the production bounced back to higher volumes and stabilised, as Autovista observed for major European markets like France, Italy, Germany and Spain.
Tesla increases drastically increased its production and has been reducing its prices by almost 20% in order to increase volume growth. Other OEMs are likely to follow, otherwise they could risk to lose their share of the market.
As always, the new and used car markets are always intertwined. Because of the stabilisation of the new car market and the increased production, In four big European markets, more used cars were sold in the second quarter of 2023 because there were more new cars being registered.
Buyers who are turning away from new cars are more likely to buy cars that are as close to new as possible, rather than cars with more mileage on them. And that means competition will be more felt in professional dealerships than in direct customer-to-customer sales as professional dealerships tend to offer newer cars than private sellers.
This is actually not a new trend, but one that has persisted for a couple of years now. For example, in 2021, buyers clearly preferred professional used car dealerships to private sellers, which signals they were mostly in the market for newer vehicles.
Illustration: eCarsTrade / Data: Bain & Company
Let’s recap. Buyers are finding the used car market attractive in 2023, especially because it’s benefiting from the increased production of new cars. This means you might be, as a trader, faced with a more competitive market than before, as prices of used cars are also stabilizing.
This tells us that good relationships with suppliers are now more important than they have been for a while, so nurture them to ensure a steady influx of high-quality cars.
If you’re a trader selling to private customers, there are a couple of things you can do to make sure customers are flocking to you, and not the reseller next door. Here are a couple to get you started:
- Offer extended warranties on younger vehicles: This is always a nice perk to have and it presents a lower risk when cars have low mileage.
- Rethink and restructure financing options: younger used cars are more expensive and your customers will appreciate flexible payment plans.
- Ensure impeccable service history: with newer cars, this shouldn’t be difficult to do and you can bet that customers looking for these types of cars are looking for reliability and no nasty surprises in their next vehicle.
To sum up, the way this market is behaving will probably make you increase your efforts. But the rewards should be worth your trouble as there are good profits to be made from selling newer used cars at a higher price.
Digitalized Sales Are Taking Off
Across many industries, the trendiest term these last couple of years has been “digital transformation,” - the name for the common effort of moving as much business as possible into the digital and online areas.
Used car sales were slow to join in, but it seems that this sector is finally catching on as more and more sales and trades are happening online. In fact, automotive experts following the industry now predict that as much as 10% of all used car sales will be happening online by the year 2025. Considering this figure was less than one percent in 2020, we can conclude that this is a huge rate of growth!
Illustration: eCarsTrade / Data: Roland Berger
Buyer attitudes towards online used car sales are also changing. The number of European buyers willing to purchase a car this way has been steadily growing and now stands at 16% (and as high as 24% in some locations, such as Germany).
And when we say “buyers”, that doesn’t just go for end-consumers. The digital boom is equally strong in the B2B segment where online dealerships and auction platforms have been instrumental in supplying B2C dealers with quality cars from every corner of Europe.
It’s not difficult to see the benefits in doing business online as these dealerships and platforms allow customers to browse cars of all makes, models, conditions, mileage, and so on, out of the comfort of their home.
For example, our own online B2B used car auction platform, eCarsTrade, provides access for dealers to thousands of vehicles with lots of information to make an informed and solid purchasing decision.
Browsing Cars on eCarsTrade is easier than coming into a dealership
After you’ve found the right vehicles for your dealership, just make a bid or buy directly. With the purchase made, all you have to do is pick up the vehicle at our premises or inquire for a delivery option, wherever in Europe you are.
The digital transformation is everywhere and every industry has had its own experience with it. As an operator in the used car market, it would be a wise business decision to start moving your sales into the online realm. Trust us, your clients will expect to have this purchasing option very soon.
What to Expect in the 2024 Used Car Market
The year is still nowhere near over, but the wise car dealer knows to look ahead to anticipate trends and avoid problems. So let’s end this article with a look to the future and what the used car market will look like in the year 2024.
Inflation to Ease and Prices to Drop
We’ve touched on the ongoing inflation a few times in this article so let’s finally conclude that economists are pretty convinced that we’ve seen the peak of accelerated price growth. According to one report, global used car prices are already falling and that trend should continue on well into 2024.
Illustration: eCarsTrade / Data: CarExpert
This release from inflatory pressure comes from new car production ramping up globally, which will mean more car availability for the used market, as well as less interest in used cars when new cars are more readily available.
The EU is Positioned to Become Global Leader in EV Market
As you may already know, EU legislation is promoting carbon neutrality, and transportation is a big part of their efforts.
One of the more dramatic moves is the total ban on internal combustion engine car sales by the year 2035. Until then, European citizens can enjoy financial incentives and perks for buying electric vehicles, while also avoiding rising penalties and restrictions for driving traditionally fueled cars.
These efforts are having an increasing impact on car sales in Europe with more and more people opting to go electric and it is now estimated that a full third of all car sales in EU will consist of EVs by the year 2025 and keep rising until it hits an impressive 70% in 2030.
That’s a huge customer base so it wouldn’t be a bad idea to get a jump on this market and start acquiring EVs for your business to get ahead of the future demand.
The Rise of AI
Professional from all industries have found incredible uses in AI tools such as ChatGPT, especially when it comes to making work processes more efficient and data oriented. The used car sector is also learning about this novel technology.
Machine learning, one of the principal ways AI systems process data and deliver results, allows computers to formulate accurate and objective solutions by using massive amounts of data that’s been accumulated over years on the internet. Do you see the value in this?
Car sales experts now predict they will soon be able to calculate prices objectively, using a vast number of data points about the vehicle as well as the current market. AI systems are also advanced enough to provide you with forecasts for which cars will make a good investment, when to buy them, and what to spend.
Thanks to this technology, you’ll soon be able to serve your customers better with a smartly structured supply, objective and fair pricing, and a more comfortable and safe customer journey. This is not a question of if, but when so get acquainted with generative AI tools and plan to integrate them into your business.
2024 Brings Good News for Car Traders
In conclusion, we can definitely say that 2023 hasn’t been the easiest year for used car dealers. Inflation has slowed down business and many technological advances, such as online sales, EVs going mainstream, and the arrival of AI, are gradually changing the face of used car sales.
There was a lot for dealers to adapt to, but the good news is that all of this effort will pay off next year when prices are set to drop and business is predicted to pick up. That will allow you to recuperate and conduct business with more confidence. And as that happens, you can count on eCarsTrade to keep your inventory full and your customers happy. Head on over to our site and browse our offer of quality used vehicles for all of your needs.
