Used cars - from outsider to market driver

AuszugIn the European Union, more than 50 million vehicles are registered each year. The ratio between title transfers and new registrations is roughly 3:1. Used cars generate a significant share of European car sales. In Germany, they total 40 percent. While the new-car market is increasingly being shaped by commercial customers, more and more private customers are tapping into the used-car market. Overall, used cars are newer and have better technology today than they did in the 1980s. In terms of quality, “young used cars,” which once belonged to car-rental agencies or served as company cars or demonstration vehicles, are very difficult to distinguish from new cars. But they can be purchased at just a fraction of the sticker price. The overcapacities among manufacturers in Europe in recent years have flooded the commercial and private markets with discounted new cars. However, as manufacturers plan their production targets, they fail to adequately factor in these overcapacities as future used cars. Automakers have not fully modified their production programs, their business processes and their sales and marketing policies to meet the new market conditions. As a result, advertising aimed at private customers focuses on new cars, while the used-car business often remains neglected or is seen as a selling tool for new cars. This must change in the years ahead – even if cash-for-clunker incentives in certain countries allow some breathing room for the new-car business. But in 2010, the German automotive research organization the German Institute for the Automotive Industry (Institut für Automobilwirtschaft) is predicting a dramatic drop in new-car sales. Car dealers – who have been under pressure for years from manufacturers demanding that they sell new cars according to increasingly stricter guidelines, but at continuously shrinking margins – are using the new-car business as an interesting entrepreneurial playing field. Thanks to the Internet, today’s car buyers are better informed about market dynamics and prices, and they place high demands on quality and service – also and particularly for the used-car business. The image of used-car dealers as “shady characters” does not reflect the state of today’s business because the competition never sleeps. A host of best-practice examples demonstrates how companies have successfully boosted their used-car sales – even during the crisis. As our study shows, sales and profitability in the used-car business can increase significantly when processes are improved and a few key factors for success are considered. These factors can be translated into the formula: “Transparency + brand = trust.” Altogether, the used-car market boasts an economic potential of up to 140 billion. Our discussions with managers and experts from the European automotive industry as well as our market research conducted with new- and used-car sellers have identified a range of ways to optimize the European used-car business. Our study also reveals that there is a strong interest for information about the used-car market. We hope to address this need with our study. Above all, the CARFAX study seeks to provide insights into the future of the automotive market and offer a specific course of action. We hope you enjoy this study.