Britain’s biggest car dealer is switching its focus to the used market, after a slump in sales of new vehicles dragged down its annual profits by a fifth.
Pendragon, which trades under the Evans Halshaw and Stratstone brands and sells all the main marques, said profit before tax fell to £60.4m last year from £75.4m in 2016.
Used car revenues rose 15.8% to £2.1bn while new car revenues fell 8.9% to £1.8bn. Along with other dealers and carmakers, Pendragon sold luxury cars at big discounts to clear excess stock in the summer.
Following its surprise profit warning in October, the company put its US motor division up for sale in December, hoping to raise more than £100m. It expects to make a further £100m from selling a number of its luxury new car showrooms in the UK as part of a shift towards used vehicles.
Trevor Finn, the Pendragon chief executive, said the used car market – which totalled 7.8m vehicles last year – was more than three times bigger than the new car market and that margins were higher.
Pendragon plans to double its share of the used car market to 10% by 2021. It will open outlets that only sell used vehicles in Norwich, Ipswich and Shrewsbury by the end of March, aiming to take the number of used car sites from 27 to 40 over the next three years. The firm is also investing in its website.
The UK market for new cars declined last year for the first time since 2011, bringing an end to a boom that had been fuelled by cheap finance and personal contract plans (PCP), which now account for the vast majority of all of new car registrations.
That number has been stable, at about 82%. “Customers who bought cars on this method [PCP] are continuing to buy cars on this method, and repeat the purchase every two to three years,” said Finn.
Britain’s car industry body expects demand for new cars to fall by a further 5%-7% this year before recovering next year. It has blamed uncertainty caused by Brexit and the government’s diesel policy.
Finn concurred with this forecast, noting that some car manufacturers had started scaling back production in the UK, where demand has waned since hitting a record high in 2016.
Shares in Pendragon jumped 17% as investors welcomed the company’s plans.
