National car dealer Pendragon has reported that used car prices have risen almost a third in the last year.
Average second hand car prices within the group were almost £19,000 during the first half of 2022, compared the £14,400 a year earlier. Its average new car sales price was up 13 per cent at more than £29,000 – compared to less than £26,000 a year before. Rising prices reflected a lack of supply and a drop in the number of cars the Nottingham-based business sold.
Pendragon said it sold just over 46,000 used cars in the UK in the first six months of this year, and almost 24,700 new cars. That compared to 53,900 and 30,000 (respectively) a year before.
Total group sales for the six months were £1.8 billion, 1.6 per cent up on a year earlier. Underlying pre-tax profit was £33.5 million, down 4.6 per cent.
Chief executive Bill Berman said sales had been strong but supply constraints and inflation were affecting things, and warned that the next few months would be challenging.
Brands within the group include Evans Halshaw – which has 100 sites – premium dealer Stratstone; fleet and contract hire business Pendragon Vehicle Management; car parts distributor Quickco and software company Pinewood Technologies. Its online CarStore.com brand underwent a relaunch in May and lists around 10,000 cars across the various group brands.
The first physical CarStore site opened in Chesterfield in April with another due to open in Warrington, and there are also 10 smaller CarStore Direct sites.
Back in May it was announced that an international corporate had dropped a £400 million bid for the Nottingham-based car sales business after failing to get agreement for a sale from one of its five biggest shareholders.
Mr Berman said: “The recent announcement about the possible offer for the group from a large international corporation demonstrates great interest in the strength of our strategy and the prospects for the group overall.
“Whilst this proposal did not proceed, the board considered that it merited discussion with our shareholders. But we continue to strongly believe in our market-leading proposition and remain well positioned to capitalise on the long-term growth opportunities and navigate the near-term headwinds.
"We have made a really encouraging start to the year which is reflected in a strong set of financial results and continued momentum across the business.
"We have delivered these results in the face of challenging trading conditions in our sector due to supply constraints on both new and used vehicles and the impacts of inflationary pressures.
“We expect the environment to remain challenging in the second half of the year, however we take confidence from how we have performed in the last six months and expect to make further positive progress towards our long-term goals this year."
Commenting on the interim results, Julie Palmer, a partner at corporate restricting specialist Begbies Traynor, said “Despite selling about 15pc fewer new and used cars, Pendragon’s revenues and [gross] profits both rose, highlighting the squeeze in supply of vehicles on the market.
“Pendragon’s average selling price of a second-hand car was almost a third higher than a year ago at £19,000, while new cars were going on average for £29,000, a 13pc jump.
“A shortage of microchips needed to build modern cars means that dealers like Pendragon are struggling to get their hands on vehicles to sell, pushing up prices. Although this is slowly easing, the problem is still delivering a short-term boost to automotive retailers.
“How they will fare when the issue is resolved remains to be seen. Manufacturers will want to manage supply to prevent prices going off a cliff edge, but the toughening economy could magnify any problems.
“The cost-of-living crisis and soaring inflation means that cash-strapped consumers may have no choice but to hold on to their cars for longer, just as production normalises and new vehicles come flooding into the market.
“When some households may be forced to choose between heating or eating, replacing the family car will be low down on their list of priorities.”
