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Sunday, 11 May 2014

Car Market - Into and Out of Recession - UK

Car Market - Into and Out of Recession - UK  

The Car Buyer – New or Second-hand?


Key points
              Potential demand for second-hand cars far outweighs potential demand for new cars and demand for used is still skewed to 15-34 C1C2DEs while demand for new is still skewed towards over-45 ABs.
              Although the use of a mortgage specifically for the purpose of buying a car is rarely admitted by consumers, the availability of surplus funds following the remortgaging of a property appears to be a major determinant influencing new car purchases.
              Potential used car buyers are more likely to be renting property or living at home with parents and so the decline in the UK housing market in terms of property values and housing transactions is less likely to be an influence on demand for used cars than new.
              Owning property outright, as a high proportion of potential new car buyers tend to do, means that new car buyers with homes paid for are unconstrained by mortgages from buying a new car and are ideal prospects for point-of-sale motor finance.
              The majority of intended car purchases are for a replacement vehicle, particularly among older and more affluent groups, which implies the purchase of a new rather than second-hand car.
              Purchasers of a first car are the youngest and least affluent, indicating that the bulk of these will be purchases of second-hand cars.

Property ownership – a major influence on new car demand
              Used car buyers form the largest proportion of those intending to buy a car and used car buyers are more likely to be the younger and less affluent groups aged 15-34 and in C1C2DE groups with incomes under £29,999.
              While some used car buyers might be buying their own home, they are more likely to rent property or are still living at home and still single.
              New car buyers, by comparison, are more likely to be older, affluent, over-45s and in the AB socio-economic group. They are also more likely to be separated, divorced or widowed without any children living at home and have an income of above £30,000.
              New car buyers are more likely to either own their home outright or be in the process of buying their own home. Property status and the absence of a mortgage or only a relatively small one are therefore likely to be a significant factor influencing the decision as to whether or not to buy a new car.

FIGURE 21: Type of car intend to buy, by demographic sub-group, 2008

Base: adults aged 17+ who intend to buy a car in the next 12 months

New
Second-hand
Don't know yet

%
%
%




All
20.2
56.2
19.2




Gender:



Male
20.5
56.7
18.5
Female
19.8
55.7
20.1




Age group:



17-24
8.2
61.2
28.6
25-34
8.9
62.9
22.5
35-44
21.5
57.9
17.4
45-54
24.6
57.2
14.2
55-64
33.1
48.4
13.7
65+
39.4
37.3
13.8




Socio-economic group:



AB
28.0
51.8
17.5
C1
18.4
58.2
19.2
C2
14.1
58.4
21.2
D
13.2
58.3
23.4
E
22.0
59.4
11.0




Marital status:



Single
10.3
62.3
23.4
Married/civil partnership/living as a couple
22.9
54.9
18.1
Separated/divorced/widowed
27.0
49.8
15.7




Children in household:



Yes
17.5
58.3
20.1
No
21.9
55.0
18.6
Child(ren) under 1 year
10.5
73.2
15.9
1-4 years
17.7
55.4
25.4
5-9 years
23.1
53.2
17.6
10-15 years
18.1
59.3
16.2




Family income before tax:



Up to £9,999
12.9
61.4
21.2
£10,000-19,999
17.2
58.1
18.8
£20,000-29,999
15.9
63.5
18.0
£30,000-39,999
21.2
55.5
17.6
£40,000-49,999
27.3
57.4
10.8
£50,000 or over
25.8
49.3
23.1




Accommodation status:



Own home outright
30.4
46.4
17.8
Buying home
19.5
59.6
18.0
Rent from council
14.1
53.6
25.9
Rent from someone else
9.5
64.6
21.5
Occupy rent-free
6.8
64.9
7.2
Rent-free – council
0.0
35.8
12.4
Rent-free – someone else
10.5
80.4
4.5
Own/buying home
23.4
54.8
18.0
Rent home
11.5
59.9
23.4




Region:



Scotland
26.4
50.3
17.5
North West
20.0
44.6
27.0
North
21.9
52.8
22.0
Yorkshire & Humberside
26.1
53.0
18.9
East Midlands
15.8
66.9
12.6
East Anglia
23.3
65.4
10.4
South East
21.5
58.5
16.5
Greater London
17.2
53.8
23.9
South West
17.2
65.6
12.3
Wales
18.9
57.2
20.9
West Midlands
15.3
56.7
24.0


Taken from the TGI survey of around 25,000 adults
SOURCE: GB TGI, BMRB 1998 & Q3 2008/Mintel

New or second-hand? – influenced by lifestage and life event
              The young age profile of those intending to buy a second-hand car means that by lifestage buyers are more likely to be Fledglings, those that have Flown the Nest and ABC1 Nest Builders. Less affluent parents of school age children plus C2DE Mid-life Independents and Unconstrained Couples are more likely to be buyers of second-hand cars.
              Potential new car buyers are, by comparison, more likely to be the affluent equivalent of used car buyers, namely ABC1 parents of school age children; whereas used car buyers comprised the younger end of the lifestage spectrum, new car buyers predominated the older end of the spectrum.
              Where the young end of the spectrum for used car buyers comprised both ABC1 and C2DE groups, the older end spectrum for new car buyers also comprised both ABC1 and C2DE groups for both Senior Sole Decision Makers and Empty Nesters – the primary groups for new cars.
              In terms of life events, new car and second-hand car prospects occupy opposite ends. For younger second-hand car buyers it is starting or changing a job, moving out of home or in with a partner and getting engaged that are the life events that can trigger the desire or need to buy a second-hand car.
              For new car prospects, making major home improvements, the marriage of an older child, the birth of grandchildren and entering into retirement are the life events that can trigger the desire or need for a new car.
              Clearly, life events can be a key determinant in influencing the need or desire to buy a car, whether a first car, second car or replacement. Whether it is to be new or second-hand is more likely to be influenced by lifestage, which in turn is related to affluence in later life after children leave home and become independent and as financial commitments such as mortgages diminish.
              The opposite of course is true for second-hand car buyers where embarking in life in marriage, raising children and mortgage commitments result in scarce financial resources making ownership of a second-hand car a more practical choice.

FIGURE 22: Type of car intend to buy, by lifestage and life event, 2008

Base: adults aged 17+ who intend to buy a car in the next 12 months

New
Second-hand
Don't know yet

%
%
%




All
20.2
56.2
19.2




Lifestage:



Fledglings – ABC1
10.8
63.8
22.0
Fledglings – C2DE
8.9
62.5
24.4
Flown the Nest – ABC1
6.9
62.0
27.8
Flown the Nest – C2DE
17.1
66.5
16.3
Nest Builders – ABC1
10.8
62.0
23.1
Nest Builders – C2DE
3.7
51.5
40.6
Playschool Parents – ABC1
24.2
58.9
15.9
Playschool Parents – C2DE
6.8
62.4
28.8
Primary School Parents – ABC1
24.0
50.1
22.9
Primary School Parents – C2DE
13.5
59.0
13.3
Secondary School Parents – ABC1
24.0
56.5
14.8
Secondary School Parents – C2DE
14.2
59.3
18.8
Mid-life Independents – ABC1
18.8
65.7
12.2
Mid-life Independents – C2DE
14.5
72.6
8.5
Unconstrained Couples – ABC1
25.5
53.9
18.1
Unconstrained Couples – C2DE
18.2
71.3
7.7
Hotel Parents – ABC1
19.6
59.3
15.8
Hotel Parents – C2DE
23.5
52.3
19.2
Senior Sole Decision Makers – ABC1
41.4
38.2
15.0
Senior Sole Decision Makers – C2DE
25.3
42.5
16.2
Empty Nesters – ABC1
43.5
40.8
11.6
Empty Nesters – C2DE
31.4
49.5
12.8
Non-standard Families
13.7
46.8
34.2
Unclassified
3.6
89.0
2.2




Life events experienced in the last 12 months:



Finish school
11.0
52.1
32.6
Start university
10.0
55.7
19.1
Start first job
2.4
61.4
29.7
Change job
9.5
56.5
32.7
Move out of parental home
2.9
62.6
34.0
Move in with partner
4.4
60.0
34.8
Get engaged
7.5
62.5
29.5
Get married
6.3
50.6
42.4
Purchase/sell a house/flat
16.2
53.0
25.6
Make major home improvements
21.4
54.9
20.9
Birth of your first child
13.2
50.8
31.2
Birth of your second or subsequent child
1.4
59.8
30.5
Child goes to university
20.8
65.9
12.5
Child gets married
44.4
41.1
12.1
Birth of grandchild
26.1
57.7
10.1
Divorce/separate from long-term partner
12.0
67.4
16.2
Enter retirement
25.1
51.6
17.9


Taken from the TGI survey of around 25,000 adults
SOURCE: GB TGI, BMRB 1998 & Q3 2008/Mintel

Replacement or new demand?
              For the majority of those intending to buy a car, the car to be purchased is a replacement for an existing car while for approximately a third of respondents it is a first car with just 10% intending to buy an additional car.
              The demographics of those intending to buy a replacement car correspond with those of new car buyers, with those more likely to buy a replacement car being over-35s in the affluent AB group. High replacement demand among the C2 group implies either potential new car buyers or purchasing of used or nearly new cars.
              Those intending to buy a car as a first car are more likely to be women than men, aged 15-34 in the DE socio-economic group, which corresponds to the ownership demographics of used car buyers.
              The intended purchasing of an additional car is skewed towards the young and the middle-aged, affluent ABs and less affluent Ds. This is likely to reflect different demand characteristics at different lifestages and as different life events occur.
              The regions that will potentially benefit from higher replacement demand will be the North, Yorkshire and Humberside, East Midlands and the South West. Additional demand for cars is more likely to occur in Scotland, East Anglia, the South East and Wales. New demand is most likely to occur in Greater London and the West Midlands, indicating an increase in demand for cars in areas of high population densities.

FIGURE 23: Type of car intend to buy, by demographic sub-group, 2008

Base: adults aged 17+ who intend to buy a car in the next 12 months

A first car
An additional car
A replacement car

%
%
%




All
30.7
9.6
54.2




Gender:



Male
28.7
9.9
56.0
Female
33.1
9.4
51.9




Age group:



17-24
53.8
11.4
32.4
25-34
39.0
8.8
46.5
35-44
21.1
14.0
61.1
45-54
22.5
10.7
60.7
55-64
19.4
5.1
69.1
65+
18.2
1.8
67.1




Socio-economic group:



AB
20.4
11.2
64.4
C1
32.5
8.1
52.5
C2
29.6
9.1
55.7
D
41.2
12.9
40.2
E
62.9
3.3
27.6




Marital status:



Single
50.7
9.8
35.1
Married/civil partnership/living as a couple
23.3
10.4
60.9
Separated/divorced/widowed
31.6
3.1
55.9








Children in household:



Yes
34.3
12.1
50.2
No
28.4
8.1
56.7
Child(ren) under 1 year
23.7
12.6
56.4
1-4 years
29.0
13.6
53.6
5-9 years
31.1
11.5
55.4
10-15 years
35.6
12.4
48.6




Family income before tax:



Up to £9,999
45.7
7.8
37.5
£10,000-19,999
35.5
6.5
51.2
£20,000-29,999
30.9
8.8
56.1
£30,000-39,999
26.7
10.2
57.3
£40,000-49,999
27.4
13.1
55.1
£50,000 or over
13.1
14.1
68.7




Accommodation status:



Own home outright
19.4
8.0
65.2
Buying home
25.4
10.0
59.4
Rent from council
51.3
7.7
36.3
Rent from someone else
52.1
13.2
31.2
Occupy rent-free
39.7
9.1
50.6
Rent-free – council
56.6
8.3
33.5
Rent-free – someone else
30.7
9.6
59.7
Own/buying home
23.3
9.3
61.5
Rent home
51.8
10.8
33.4




Region:



Scotland
30.1
13.0
52.2
North West
33.9
7.8
46.4
North
27.3
5.9
60.1
Yorkshire & Humberside
30.4
2.7
60.2
East Midlands
18.5
8.4
69.5
East Anglia
21.2
22.4
53.4
South East
28.2
11.8
55.7
Greater London
50.1
7.3
38.2
South West
22.3
10.8
62.2
Wales
27.4
13.7
55.4
West Midlands
33.8
6.5
54.2


Taken from the TGI survey of around 25,000 adults
SOURCE: GB TGI, BMRB 1998 & Q3 2008/Mintel

The impact of lifestage and life event on new or replacement demand
              High replacement demand is apparent across a range of lifestages from Nest Builders to Empty Nesters, but at the younger lifestages, replacement demand is higher only among the affluent ABC1s. It is not until the more Mid-life Independent lifestage is reached that there is higher replacement demand among C2DEs.
              Higher demand for additional cars is more apparent among younger C2DE lifestage groups, particularly parents with school age children, but also among affluent Mid-life Independents and Hotel Parents. This indicates demand for a second vehicle as lifestyles change as parents and couples operate more independently of each other.
              Demand for a first car is generally higher in the early lifestages for both ABC1 and C2DE groups as both types begin to move away from the family home. Demand for a first car then rises again among C2DE parents of school age children as one parent becomes a car owner for the first time and requires a car for the school run and other parental duties.
              In terms of life events experienced, the birth of a first child is a major demand determinant for first and additional cars as are starting or changing jobs, getting engaged or getting married. Replacement demand is also influenced by getting married and by the birth of second or subsequent children, but also by the marriage of older children and divorce or separation from a long-term partner.

FIGURE 24: Type of car intend to buy, by lifestage and life event, 2008

Base: adults aged 17+ who intend to buy a car in the next 12 months

A first car
An additional car
A replacement car

%
%
%




All
30.7
9.64
54.2




Lifestage:



Fledglings – ABC1
54.1
10.5
28.5
Fledglings – C2DE
61.9
12.9
24.9
Flown the Nest – ABC1
69.5
0.0
30.5
Flown the Nest – C2DE
86.8
4.3
8.8
Nest Builders – ABC1
28.9
7.1
58.2
Nest Builders – C2DE
34.3
26.9
31.9
Playschool Parents – ABC1
19.1
14.7
60.6
Playschool Parents – C2DE
36.4
15.0
47.6
Primary School Parents – ABC1
20.8
9.6
67.1
Primary School Parents – C2DE
43.0
9.7
44.5
Secondary School Parents – ABC1
20.2
15.7
59.3
Secondary School Parents – C2DE
31.4
8.8
52.4
Mid-life Independents – ABC1
18.9
25.4
52.0
Mid-life Independents – C2DE
19.4
2.8
68.9
Unconstrained Couples – ABC1
16.5
7.6
72.8
Unconstrained Couples – C2DE
24.4
4.9
62.3
Hotel Parents – ABC1
20.1
13.7
59.8
Hotel Parents – C2DE
33.8
4.5
54.1
Senior Sole Decision Makers – ABC1
27.6
2.5
61.4
Senior Sole Decision Makers – C2DE
28.3
2.3
46.7
Empty Nesters – ABC1
11.9
3.5
78.2
Empty Nesters – C2DE
24.6
2.6
62.4
Non-standard Families
38.7
3.3
50.4
Unclassified
52.8
0.0
42.1




Life events experienced in the last 12 months:



Finish school
75.9
5.9
15.9
Start university
35.7
15.4
36.3
Start first job
74.6
12.2
12.1
Change job
35.4
10.0
49.6
Move out of parental home
44.3
19.8
35.9
Move in with partner
50.6
19.4
29.7
Get engaged
60.9
7.2
31.5
Get married
31.1
6.3
60.5
Purchase/sell a house/flat
19.9
8.6
65.4
Make major home improvements
27.9
9.8
57.2
Birth of your first child
40.9
14.4
43.0
Birth of your second or subsequent child
26.8
6.8
57.4
Child goes to university
20.8
4.0
63.4
Child gets married
23.0
1.5
69.7
Birth of grandchild
29.9
4.7
59.4
Divorce/separate from long-term partner
25.8
8.1
61.4
Enter retirement
28.2
3.8
59.6


Taken from the TGI survey of around 25,000 adults
SOURCE: GB TGI, BMRB 1998 & Q3 2008/Mintel