Vertu sees used car prices steady, but new vehicle sales remain under pressure

Car dealership Vertu Motors has said used vehicle prices have steadied after hefty falls, but cautioned that consumer uncertainty was still taking its toll on demand for new models.

The group saw used car prices drop by 10.3% between October and December as values tumbled following steep gains in the previous few years.

It warned in December that this would knock its profits, although it said it would also make them more affordable to buyers.

Vertu said in its latest update that the used car prices have “stabilised in recent weeks following post-October wholesale pricing correction”, and are now more in line with seasonal norms, with like-for-like sales by volume up 0.8% in the five months to January 31.

This marked a recovery from a 5.7% drop in the first six months of its financial year.

But it said the new vehicle market continued to suffer, with like-for-like sales by volume down 5.1% in the five months to the end of January amid cost pressures on consumers, with car makers ramping up incentives and offering discounts to boost demand.

Vertu said: “The group’s new vehicle order-take for the important plate change month of March is currently tracking at levels below prior year level as order banks have been satisfied and the UK moves to a supply push market.

“These trends have the potential to impact margin and volumes and leads to an uncertainty for the new retail market.”

Robert Forrester, chief executive of Vertu Motors, said the group was having to adapt to a “fast-changing market backdrop, with used vehicle prices now stabilised at lower levels and consumer uncertainty impacting retail demand for new cars”.

Vertu said profit margins from used cars have started to recover since January, as new stock has been added.

It said: “The group has worked hard and proactively to increase used vehicle stock turn and reduce overall inventory levels.

“Consequently, in recent weeks, improved used vehicle gross profit per unit has been generated by the Group.”

The group forecast that full-year underlying pre-tax profits would be “broadly” in line with recently lowered market expectations.

Overall group revenues lifted 7.8% in the most recent five months thanks to a more resilient performance from its after-sales business, mobility sales and also cost cutting actions.