“Revenge buying, it wasn’t something I’d thought of before, it just came out. And now it’s a thing,” says Daksh Gupta, chief executive of car dealer group Marshall Motors.
His ad-lib on early morning Radio 4 to describe trends his company is seeing in the post-lockdown car market encapsulates what’s going on in parts of the industry.
It boils down to this: consumers who are secure in their jobs despite the pandemic have had nowhere to spend the cash that in normal times they would drop on holidays or, until recently, going out. Many of them are also saving a packet on travel costs by working from home.
“People had a hard time during the lockdown and they want to reward themselves with something nice,” adds Gupta. “A lot of them are spending that extra money on cars.”
Of course, it’s in Gupta’s interests to talk up the market which went off a cliff as the lockdown forced dealers to shut. In the months from March to June, new car registrations fell by 44pc, 97pc, 89pc and 35pc respectively, before a rebound of 11pc in July, the first full month of forecourts being open across the UK.
The Society of Motor Manufacturers and Traders concedes the automotive sector is hardly firing on all cylinders. With only 828,000 new cars sold in the year to the end of July, the most recent data available, the market is down 42pc – almost 600,000 cars – on the same point a year ago.
Despite positive noises about “pent-up demand” from the trade group, it is predicting 2020 will result in a 30pc fall in sales on the previous year, down to about 1.8m new cars, representing more than £20bn of lost business.
However, Gupta is not alone in his upbeat outlook. James Baggott, editor-in-chief of Car Dealer magazine has unique insight into what the UK’s more than 10,000 car dealers are seeing and hearing from the country’s motorists.
“Say it quietly, but some dealers think this could be the best September they’ve ever had,” he says, referring to one of the two key months when registration plates update.
Hopes of a recovery are backed up by data from car sales website AutoTrader. New car sales leads generated by drivers viewing the site from Aug 17 to 23 were more than 50pc higher than in the last week of February, just before the year’s other registration plate change month of March. The fact that they are higher now than in February, when the impact of coronavirus was far from understood, is a strong signal of appetite levels as drivers seek to ease some of that “pent-up demand”.
Trading up isn’t just happening in the new car market. According to Baggott, the much larger second-hand market which normally sees more than 7m sales a year, is also feeling the change. “Revenge buying is an interesting term,” he says. “I’m not sure it’s quite right but we are seeing different behaviour in the used market, too. I’m hearing tales of people deciding they really do want the convertible they said no to before or the hot hatch.”
Motorway.co.uk described second-hand prestige cars as “pandemic proof”, citing year-on-year price increases of between 8.5pc and 10pc on second-hand for upmarket brands Maserati, Land Rover and Lexus. “Any expected drop off in values just hasn’t happened,” says Alex Buttle, director of the online car marketplace.
At the very top of the market, where customers’ wealth insulates them from the financial concerns of most, sales aren’t just insulated from Covid-19’s impact, they are actually accelerating, says Baggott. There is even talk of government grants intended to help small businesses endure Covid-19 being used by company directors to fund purchases of the car they always dreamed of but couldn’t justify.
But that’s the experience of motorists who are having a “good” pandemic. There’s a flip side, with those who have been made redundant suddenly discovering they can no longer afford the car they have been driving on one of the PCP deals that now represent more than 80pc of the new car market.
One story doing the rounds is of a dealer buying back an upmarket Lexus he’d sold to a customer who subsequently lost his job and had to trade down.
The car was only weeks old and had just 400 miles on the clock – the dealer got the virtually new car at a £20,000 discount. It’s not just the upper echelons of the car industry seeing increased demand. “Bangernomics” – a semi-joke industry reference to buying cheap, old cars – is on the rise.
AutoTrader has seen a 49pc rise in demand for cars priced at less than £10,000 compared with a year ago. “Some people are trading down but mostly it’s because people are avoiding public transport and looking for a cheap alternative,” says Ian Plummer, the company’s commercial director.
Used car dealers are reporting increasing difficulties getting hold of vehicles as the car auctions they tap for many of them are only slowly getting back to normal tempo because of coronavirus restrictions. Bangernomics could even give an indication of the make-up of local economies, according to Professor David Bailey, an automotive industry expert at Birmingham University.
Areas dependent on industries such as manufacturing or retail, jobs which cannot be done from home and have been suffering, may well see demand for older, cheaper cars rise. Conversely, areas with large numbers of white-collar workers who are toiling remotely could see an influx of newer or flashier motors.
However the current economic turmoil plays out, there is one group in the industry likely to win out: the dealers themselves. Margins in automotive are notoriously tight and increasing sales volumes is one of the best ways to increase profits, something that is only helped by higher prices on second-hand sales thanks to restricted supply.
“The start of the year was horrible,” says Baggott. “But some now think 2020 could be their most profitable year ever.”