- Used car retailers are struggling to make a profit HonkHonk analysis finds
- Rising servicing, repair and preparation costs is eating away at sales margins
- Private sellers should take the opening offer because it’s the best they’ll get
Gone are the days when buyers and sellers could haggle over the price of a second-hand car and were happy to meet in the middle.
Now, used motor dealers are just pleased to break even, according to a new study.
But while this might sounds like good news for second-hand car purchasers, those trying to offload their used motor onto a trader might need to accept the first offer they get.
Motorists are no longer in a position to haggle over used car prices because the profit margins are so small
HonkHonk, a platform that connects private used car sellers with dealers in need of stock, reports that overheads and preparation costs for businesses have risen so vastly in the used car market that retailers no longer expect to net a profit on sales.
Motorists selling their cars are taking the hit too, rejecting the first offer they get as ‘too low’ only to find a better offer doesn’t materialise and their car’s lost even more value.
The post-pandemic collapse in car values coinciding with a huge – and unprecedented – increase in service, repair and preparation costs is to blame.
Rising repair costs and the difficulties this poses to independent garages and their customers is something MailOnline and This is Money has recently analysed.
A quarter of car repair businesses say rising costs will be a challenge this year, with rising energy bills, labour and parts costs likely to be passed onto drivers.
Garage owner Hannah Gordon told This is Money that independent garages only pass on rising repair costs as a ‘last resort’ and HonkHonk says ‘spiralling costs’ is the only reason used dealers are offering lower prices
Some 54 per cent of garages surveyed by the Motor Ombudsman said they were trying to avoid passing these costs on to drivers.
Garage owner and star of TV series Dave’s Repair Lot, Hannah Gordon, told This is Money: ‘It’s a last resort having to pass these onto customers.
‘We don’t want to give customers growing bills but we also have to factor in that we are a business – it’s a complete juggling act with outgoing and incomings to ensure we still provide value for money.’
Sebastien Duval, HonkHonk chief executive, says: ‘The myth that dealers are trying to inflate profits when they offer a bit lower than the publicised trade price for a car is revealed by our analysis of spiralling preparation and presentation costs before a car can be sold again.
‘We’re seeing an increase in private sellers deciding to sell their car just ahead of a major service, to avoid that expenditure, without considering that the buyer will have to take that cost into account in the offer they make.’
HonkHonk illustrated the hit used car retailers are taking with one of the most popular used cars in the UK, the Ford Focus.
If a Focus is retailing at £12,000, once business overheads have been taken into account, the average profit can be well under the minuscule amount of £300.
Used car retailers are finding that the rising costs of servicing, repair and preparation leaves them happy to just break even
Private sellers are wanting to shift their car before they have to pay for expensive repairs, overlooking the fact this will reflected in the offer they receive for it
Independent market information experts Cap Hpi warned last week that the value of cars in stock is reducing each day because the market is only just stabilising after last year’s huge tumbles.
The parting expert advice from Duval to private sellers is to take the good offer when you get it and remember that even if you think you’re dodging service costs before selling you’ll see them reflected in the price you’re presented with.
‘A HonkHonk user was told that his offer £750 below the published trade value of a BMW was unfair, even though the car was immediately due a major service and needed two new tyres,’ the company said.
