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Car Purchasing Process - UK - April 2013

“New car sales have failed to fully recover from their recent slump and there is need for more proactive action by manufacturers to boost sales. Progress has already by made in stimulating interest although to push sales on from current levels, both manufacturers and dealers need to do more to understand the real needs of buyers.”

- Neil Mason, Head of Retail Research

Some questions answered in this report include:

  • Where next for new car sales?
  • What is the potential for hybrids and EVs?
  • What is the formula for capturing customers?

Despite the continuing sluggish performance of the UK economy there is good evidence that buyers are beginning to return to the new car market. Total new registrations were up around 100,000 to 2.04 million in 2012 with a 7.4% uplift in Q1 2013 compared with Q1 2012.Although recent purchase trends suggest that buyers are waiting longer between replacing their vehicle there is some evidence that short-term plans for car purchases in the coming 12 months are set to strengthen. As such, Mintel views the fortunes for the UK market as one of slow recovery with buyers set to increase their demands on manufacturers and retailers.

Examination of the types of cars now being purchased illustrates the growing demands being placed on the market. Long gone are the days that standard medium and large sized vehicles were acceptable. Many car buyers are now looking for more individual models be they exuding elements of quality and image, offering enhanced value or simply something different in terms of design than those available previously.

Mintel’s research provides a detailed profile of the UK car buyer. It shows the importance of used cars over new cars, with four out of ten car owners in possession of a second hand car compared to 27% who purchased their last car from new. Price is paramount to main car buyers to the extent that two-thirds of cars owned currently have been bought for less than £10,000. However, when looking at specific factors at the stage of buying, while price is overall the most important, other features such as reliability, low fuel consumption and safety also come into play.

Looking ahead, both manufacturers and retailers appear aware of the fact that buyers, at least for new vehicles, are both demanding more and at the same time are in a much stronger position when handing over their money. With many buyers happy to shop around for a deal, and the internet having a growing role in the search process, attracting a purchaser has become a more exacting task. Understanding the UK car buyer would appear critical for success in what remains a difficult market for manufacturers and retailers.

 

This report investigates the car-buying process and the retailing of cars to private individuals. It focuses on new car sales but also presents these in the context of the used car market. It is exclusively focused on passenger vehicles, and therefore excludes any discussion of the market for light commercial vehicles or fleet vehicles.

The report specifically excludes sales to businesses or operators of company car fleets although data for sales to all three markets are included where necessary.

The buying and selling of cars can take place through a number of distribution channels:

  • Franchised new car dealers—those under contract to specific car manufacturers
  • Multi-franchise new car dealers—those with contracts that enable them to sell the products of more than one manufacturer
  • Independents—dealers that sell used vehicles from various manufacturers, some of which specialise in nearly-new or pre-registered cars
  • Car supermarkets—large, out-of-town retail sites selling a wide variety of new, nearly-new, pre-registered and imported cars, usually in a no-haggle flat commission sales environment
  • Used-casual sales—used cars sold through private parties.

 

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Table of contents

  1. Introduction

      • Definitions
        • Abbreviations
        • Executive Summary

            • The market
              • New car sales show only a slow recovery
                • Figure 1: UK new car sales, 2007-17
              • Market conditions continue to stifle demand
                • Figure 2: Consumer confidence index, 1988-2013
              • Although some better times may be ahead
                • Companies, brands and innovation
                  • Established names come under increased pressure
                    • Figure 3: Manufacturer shares of new car registrations, 2012
                  • Buyers moving away from mass market makes
                    • The consumer
                      • Second hand is preferred over new
                        • Figure 4: Statements about car ownership, March 2013
                      • Cost is a major factor for many buyers
                        • Figure 5: Amount paid for last car, March 2013
                      • Main dealers dominate as a sales channel
                        • Figure 6: Where last car was purchased, March 2013
                      • Mixed views from consumers towards purchasing
                        • Figure 7: Consumer attitudes towards car purchasing, March 2013
                      • Price is the single most important factor
                        • Figure 8: Considerations when buying a car whether new or second-hand (top 7 factors), March 2013
                      • Shopping around is popular for many purchasers
                        • Figure 9: Agreement with statements (top 5) related to buying a car, March 2013
                      • What we think
                      • Issues in the Market

                          • Where next for new car sales?
                            • Out with the ordinary
                              • What is the potential for hybrids and EVs?
                                • What is the formula for capturing customers?
                                  • Internet begins to slow
                                  • Trend Applications

                                      • Trend: Transumers
                                        • Trend: Return to the Experts
                                          • Future trend: Human
                                          • Internal Market Environment

                                            • Key points
                                              • New car sales remain sluggish...
                                                • Figure 10: New car registrations, 2007-12
                                              • ... resulting in the ageing of the UK car parc
                                                • Figure 11: When current car was obtained, 2011 and 2012
                                              • Around half of adults own a main car purchased 3 or more years ago
                                                • Second car ownership also focused on older vehicles
                                                  • Purchasing intentions signal trend towards longer replacement cycles
                                                    • Figure 12: Frequency of replacing the car, 2010-12
                                                  • ... although 2013 purchases may be up
                                                    • Figure 13: When planned to buy, 2011 and 2012
                                                  • Second-hand cars dominate the market...
                                                    • Figure 14: Ownership of new and second-hand vehicles, 2011 and 2012
                                                  • ... although with possible growing new car sales
                                                    • Figure 15: Intention to purchase new and second-hand vehicles, 2011 and 2012
                                                  • Hatchbacks dominate interest of future purchasers
                                                    • Figure 16: Vehicle choice for those looking to purchase in the next 2 years, 2011 and 2012
                                                  • Economic downturn brings decline in car ownership...
                                                    • Figure 17: Household ownership of cars in the UK, 2006-12
                                                  • ... although recent stability for fuel prices could help boost car sales
                                                    • Figure 18: Monthly UK petrol, diesel and oil price trends, 2009-13*
                                                  • Electric, hybrid and AFVs account for relatively small share of sales
                                                    • Figure 19: Vehicle sales by fuel type, 2008-12
                                                  • Hybrids dominate the alternative fuel market
                                                    • Figure 20: Electric, hybrid and AFV sales*, 2010 -12
                                                  • Car purchasing is a joint decision
                                                    • Figure 21: Who decided on make and model, 2011 and 2012
                                                • Broader Market Environment

                                                  • Key points
                                                    • UK economy fails to recover
                                                      • Figure 22: GDP, PDI, consumer expenditure and savings, at constant 2007 prices, 2007-17
                                                      • Figure 23: Trends in GDP quarterly percentage change, 2008-12
                                                    • Consumer confidence remains subdued
                                                      • Figure 24: GFK NOP Consumer Confidence Index, January 1988-January 2013
                                                    • Employment continues to grow
                                                      • Figure 25: Employment and unemployment, by gender, 2007-17
                                                    • Growth in the number of households set to boost demand for personal transport
                                                      • Figure 26: Number of Households and persons per household, 2001-17(proj)
                                                    • Rise in the less wealthy hints at change in demand
                                                      • Figure 27: Forecast adult population trends, by socio-economic group, 2007-17
                                                    • Positives...
                                                      • ... and possible opportunities
                                                        • Ageing of the UK population presents opportunities
                                                          • Figure 28: Trends in the age structure of the UK population, 2007-17
                                                      • Strengths and Weaknesses

                                                        • Strengths
                                                          • Weaknesses
                                                          • Market Size and Forecast

                                                            • Key points
                                                              • Hopeful signs of recovery are evident
                                                                • Figure 29: UK new registrations of motor vehicles, 2007-17
                                                                • Figure 30: UK new registrations of motor vehicles, 2007-17
                                                              • Private sales show greatest variability
                                                                • Business and fleet sales market records only modest improvements
                                                                  • Forecast
                                                                    • Figure 31: UK new business/fleet sales registrations of motor vehicles, 2007-17
                                                                    • Figure 32: UK new private sales registrations of motor vehicles, 2007-17
                                                                  • A health warning
                                                                  • Segment Performance

                                                                    • Key points
                                                                      • Smaller cars are proving most popular
                                                                        • Figure 33: Sales of cars* by type, mini and medium size cars, 2007-12
                                                                      • Mini segment sales the most dynamic
                                                                        • Medium-sized vehicle sales in decline
                                                                          • Demand for dual purpose and executive cars is strong
                                                                            • Figure 34: Sales of cars* by type, other cars, 2007-12
                                                                          • Status and versatility both in demand
                                                                            • Luxury and sports vehicles disappoint
                                                                              • Private buyers favour smaller vehicles
                                                                                • Figure 35: Sales of new vehicles, % share by purchaser type, 2012
                                                                              • Individuality appears important for private buyers
                                                                                • Smaller and more individual models proving popular
                                                                                  • Figure 36: Share of vehicle types amongst private purchasers, 2010-12
                                                                                • Mass market vehicle sales suffer
                                                                                  • Dual-purpose vehicles record strongest interest
                                                                                    • Demand for small and executive models further illustrate fragmentation for private sales
                                                                                      • Diesel proving popular
                                                                                        • Figure 37: Sales of cars* by fuel, 2007-12
                                                                                      • Diesels currently account for over half of the new car market
                                                                                        • AFVs also showing signs of becoming mainstream
                                                                                        • Market Shares

                                                                                          • Key points
                                                                                            • German brands continue to make good progress
                                                                                              • Figure 38: Manufacturer shares of new car registrations, 2010-12
                                                                                            • Ford continues to perform well
                                                                                              • German brands make good progress as some buyers trade up
                                                                                                • All change for other European brands as competition intensifies
                                                                                                  • Asian brands record mixed performance
                                                                                                    • Niche brands going mainstream
                                                                                                    • Who’s Innovating

                                                                                                      • Key points
                                                                                                        • Cars coming to owners
                                                                                                          • Virtual reality viewing
                                                                                                            • Mobile-friendly websites
                                                                                                              • RAC offers a helping hand
                                                                                                              • Retailing Trends

                                                                                                                • Key points
                                                                                                                  • Dealer network showing signs of stability
                                                                                                                    • Figure 39: Number of UK franchised dealer outlets, 2000-12
                                                                                                                  • Pendragon dominates the dealer market
                                                                                                                    • Figure 40: Top ten dealership groups in the UK, by turnover, 2011
                                                                                                                  • Smaller dealers record some of the strongest improvements in turnover
                                                                                                                    • Figure 41: Top ten increased sales UK*, 2012
                                                                                                                  • Car supermarkets continue to expand presence
                                                                                                                    • Internet fails to establish itself in the market
                                                                                                                    • Brand Communication and Promotion

                                                                                                                      • Key points
                                                                                                                        • Promotional expenditure shows fluctuations
                                                                                                                          • Figure 42: Topline spend in the UK car market, 2009-12
                                                                                                                        • Big names being challenged by smaller manufacturers
                                                                                                                          • Figure 43: Top 20 car manufacturers in the UK, by advertising expenditure, 2009-12
                                                                                                                        • Promotional expenditure up for a number of established UK players…
                                                                                                                          • ... with this also true for a number of recent entrants
                                                                                                                            • Manufacturers prefer to focus expenditure on particular models
                                                                                                                              • Figure 44: Top 20 car models in the UK, by advertising expenditure, 2012-13*
                                                                                                                              • Figure 45: Advertising expenditure, by channel, 2009-12
                                                                                                                              • Figure 46: Share of advertising expenditure, by channel, 2009-12
                                                                                                                          • Brand Research

                                                                                                                            • Brand map
                                                                                                                                • Figure 47: Attitudes towards and usage of brands in the car sector, February 2013
                                                                                                                              • Correspondence analysis
                                                                                                                                • Brand attitudes
                                                                                                                                  • Figure 48: Attitudes by car brand, February 2013
                                                                                                                                • Brand personality
                                                                                                                                  • Figure 49: Car brand personality – macro image, February 2013
                                                                                                                                  • Figure 50: Car brand personality – micro image, February 2013
                                                                                                                                • Brand experience
                                                                                                                                  • Figure 51: Car brand usage, February 2013
                                                                                                                                  • Figure 52: Satisfaction with various car brands, February 2013
                                                                                                                                  • Figure 53: Consideration of car brands, February 2013
                                                                                                                                  • Figure 54: Consumer perceptions of current car brand performance, February 2013
                                                                                                                                  • Figure 55: Car brand recommendation – Net Promoter Score, February 2013
                                                                                                                                • Brand index
                                                                                                                                  • Figure 56: Car brand index, February 2013
                                                                                                                                  • Figure 57: Car brand index vs. recommendation, February 2013
                                                                                                                                • Target group analysis
                                                                                                                                  • Figure 58: Target groups, February 2013
                                                                                                                                  • Figure 59: Car brand usage, by target groups, February 2013
                                                                                                                                • Group One – Conformists
                                                                                                                                  • Group Two – Simply the Best
                                                                                                                                    • Group Three – Shelf Stalkers
                                                                                                                                      • Group Four – Habitual Shoppers
                                                                                                                                        • Group Five – Individualists
                                                                                                                                        • The Consumer – Car Ownership

                                                                                                                                          • Key points
                                                                                                                                            • Second-hand cars dominate ownership
                                                                                                                                                • Figure 60: Statements about car ownership, March 2013
                                                                                                                                              • New car ownership strongly linked with older and wealthier adults
                                                                                                                                                • Used cars record more mixed appeal
                                                                                                                                                  • Car ownership is stronger in rural areas
                                                                                                                                                    • Potential car owners focused on young adults and urbanites
                                                                                                                                                    • The Consumer – Amount Paid for Last Car

                                                                                                                                                      • Key points
                                                                                                                                                        • Buyers prefer to pay the least possible when purchasing a car
                                                                                                                                                            • Figure 61: Amount paid for last car, March 2013
                                                                                                                                                          • Healthy financial situation impacts on spend level
                                                                                                                                                            • Age of buyer also influences expenditure
                                                                                                                                                              • Men appear more likely to spend more on their car
                                                                                                                                                              • The Consumer – Where was Your Last Car Purchased?

                                                                                                                                                                • Key points
                                                                                                                                                                  • Car dealers account for around half of sales
                                                                                                                                                                      • Figure 62: Where last car was purchased, March 2013
                                                                                                                                                                    • Main dealers are especially important
                                                                                                                                                                      • Car supermarkets are the leading ‘niche’ channel
                                                                                                                                                                        • Older adults opt for dealers while younger buyers go private
                                                                                                                                                                          • Wealthier buyers prefer main dealers
                                                                                                                                                                            • Back to traditional channels?
                                                                                                                                                                              • Figure 63: Where last car was purchased, 2012 and 2013
                                                                                                                                                                            • Main dealers are preferred for new cars
                                                                                                                                                                              • Figure 64: Where last car was bought, either new or second hand by car ownership, March 2013
                                                                                                                                                                            • Increased spend equates with buying new
                                                                                                                                                                              • Figure 65: Car ownership, by cost of car purchasing, March 2013
                                                                                                                                                                          • The Consumer – The Purchasing Process

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Consumers have mixed views when it comes to car purchasing
                                                                                                                                                                                  • Figure 66: Consumer attitudes towards car purchasing, March 2013
                                                                                                                                                                                • Buying a car generates stark reactions from different buyers
                                                                                                                                                                                  • Economic difficulties welcomed by some
                                                                                                                                                                                    • Dealers have a role but replacement rates are currently low
                                                                                                                                                                                      • Men find process of car buying more attractive
                                                                                                                                                                                        • Londoners more likely to be confident
                                                                                                                                                                                          • Customer service important to older and rural buyers
                                                                                                                                                                                            • Young drivers and high earners regularly change their car
                                                                                                                                                                                                • Figure 67: Consumer attitudes towards car purchasing, 2012 and 2013
                                                                                                                                                                                              • Dealers appear to offer comfort to buyers
                                                                                                                                                                                                • Figure 68: Where last car was bought, either new or second hand, by most popular consumer attitudes towards car purchasing, March 2013
                                                                                                                                                                                                • Figure 69: Where last car was bought, either new or second hand, by next most popular consumer attitudes towards car purchasing, March 2013
                                                                                                                                                                                              • Main dealers offer a number of positive benefits
                                                                                                                                                                                                • Other channels seem to lack these benefits
                                                                                                                                                                                                  • Niche channels appeal to regular purchasers
                                                                                                                                                                                                  • The Consumer – Key Considerations When Car Buying

                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                      • Price dominates when it comes to purchasing a car
                                                                                                                                                                                                          • Figure 70: Considerations when buying a car whether new or second-hand, March 2013
                                                                                                                                                                                                        • Direct and indirect costs are most important...
                                                                                                                                                                                                          • ... followed by aesthetic factors
                                                                                                                                                                                                            • Specific factors have only limited appeal
                                                                                                                                                                                                              • Women are especially demanding
                                                                                                                                                                                                                • Older groups are more demanding
                                                                                                                                                                                                                  • Few differences by socio-economic group
                                                                                                                                                                                                                    • Costs and brand are growing in importance for many buyers
                                                                                                                                                                                                                      • Figure 71: Considerations when buying a car, 2011-13
                                                                                                                                                                                                                    • Price also dominates amongst leading factors
                                                                                                                                                                                                                        • Figure 72: Factors important when buying a car, March 2013
                                                                                                                                                                                                                      • Price and reliability dominate as key factors
                                                                                                                                                                                                                        • Other factors much less important with the exception of safety
                                                                                                                                                                                                                          • For many it is a choice between reassurance or cost
                                                                                                                                                                                                                            • Figure 73: Where last car was bought, either new or second hand, by most popular factors important when buying a car, March 2013
                                                                                                                                                                                                                            • Figure 74: Where last car was bought, either new or second hand, by next most popular factors important when buying a car, March 2013
                                                                                                                                                                                                                          • Reassurance is important from main dealers, but less so with independents...
                                                                                                                                                                                                                            • ... while private buyers are much less demanding
                                                                                                                                                                                                                            • The Consumer – Attitudes Towards Car Purchasing

                                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                                • Shopping around for a deal is important to many
                                                                                                                                                                                                                                    • Figure 75: Agreement with statements related to buying a car, March 2013
                                                                                                                                                                                                                                  • Potential buyers are likely to want to shop around for their next car
                                                                                                                                                                                                                                    • Internet remains a search-focused tool
                                                                                                                                                                                                                                      • Part-exchange important for around a half of potential buyers
                                                                                                                                                                                                                                        • New cars seen as offering better value
                                                                                                                                                                                                                                          • Electric cars have a good potential market
                                                                                                                                                                                                                                            • Dealer test drives at home have limited appeal
                                                                                                                                                                                                                                              • Shopping around has universal importance
                                                                                                                                                                                                                                                • Older buyers likely to be choosy while younger drivers focus on value
                                                                                                                                                                                                                                                  • Wealthier socio-economic groups have strong attitudes to a variety of factors
                                                                                                                                                                                                                                                    • Environmental issues important to Londoners and those on high incomes
                                                                                                                                                                                                                                                      • Main dealers are well placed for future purchases
                                                                                                                                                                                                                                                        • Figure 76: Where last car was bought, either new or second hand by most popular consumer attitudes towards buying your car, March 2013
                                                                                                                                                                                                                                                        • Figure 77: Where last car was bought, either new or second hand by next most popular consumer attitudes towards buying your car, March 2013
                                                                                                                                                                                                                                                      • Past users of main dealers would return for a variety of reasons
                                                                                                                                                                                                                                                        • Independent dealer strengths rest with offering value
                                                                                                                                                                                                                                                          • Those going private have more specific needs
                                                                                                                                                                                                                                                          • Appendix – Brand Research

                                                                                                                                                                                                                                                              • Figure 78: Brand usage, February 2013
                                                                                                                                                                                                                                                              • Figure 79: Brand commitment, February 2013
                                                                                                                                                                                                                                                              • Figure 80: Brand momentum, February 2013
                                                                                                                                                                                                                                                              • Figure 81: Brand diversity, February 2013
                                                                                                                                                                                                                                                              • Figure 82: Brand satisfaction, February 2013
                                                                                                                                                                                                                                                              • Figure 83: Brand recommendation, February 2013
                                                                                                                                                                                                                                                              • Figure 84: Brand attitude, February 2013
                                                                                                                                                                                                                                                              • Figure 85: Brand image – Macro image, February 2013
                                                                                                                                                                                                                                                              • Figure 86: Brand image – micro image, February 2013
                                                                                                                                                                                                                                                              • Figure 87: Profile of target groups, by demographics, February 2013
                                                                                                                                                                                                                                                              • Figure 88: Psychographic segmentation, by target groups, February 2013
                                                                                                                                                                                                                                                              • Figure 89: Brand usage, by target groups, February 2013
                                                                                                                                                                                                                                                            • Brand index
                                                                                                                                                                                                                                                              • Figure 90: Brand index, February 2013
                                                                                                                                                                                                                                                          • Appendix – The Consumer: Car Ownership

                                                                                                                                                                                                                                                              • Figure 91: Most popular car ownership, by demographics, March 2013
                                                                                                                                                                                                                                                              • Figure 92: Next most popular car ownership, by demographics, March 2013
                                                                                                                                                                                                                                                          • Appendix – Consumer: Amount Spent on Last Car Purchased

                                                                                                                                                                                                                                                              • Figure 93: Cost of car purchasing, by demographics, March 2013
                                                                                                                                                                                                                                                          • Appendix – Consumer: Where was Your Last Car Purchased?

                                                                                                                                                                                                                                                              • Figure 94: Where last car was bought, either new or second hand, by demographics, March 2013
                                                                                                                                                                                                                                                          • Appendix – The Consumer: The Purchasing Process

                                                                                                                                                                                                                                                              • Figure 95: Most popular consumer attitudes towards car purchasing, by demographics, March 2013
                                                                                                                                                                                                                                                              • Figure 96: Next most popular consumer attitudes towards car purchasing, by demographics, March 2013
                                                                                                                                                                                                                                                          • Appendix – The Consumer: Key Considerations When Buying a Car

                                                                                                                                                                                                                                                              • Figure 97: Most popular factors important when buying a car, by demographics, March 2013
                                                                                                                                                                                                                                                              • Figure 98: Next most popular factors important when buying a car, by demographics, March 2013
                                                                                                                                                                                                                                                          • Appendix – Consumer: Attitudes Towards Car Purchasing

                                                                                                                                                                                                                                                              • Figure 99: Most popular consumer attitudes towards buying your car, by demographics, March 2013
                                                                                                                                                                                                                                                              • Figure 100: Next most popular consumer attitudes towards buying your car, by demographics, March 2013

                                                                                                                                                                                                                                                          Companies Covered

                                                                                                                                                                                                                                                          • Audi United Kingdom
                                                                                                                                                                                                                                                          • BMW (GB) Ltd
                                                                                                                                                                                                                                                          • Chrysler LLC
                                                                                                                                                                                                                                                          • Fiat Auto
                                                                                                                                                                                                                                                          • Ford Motor Company Limited (UK)
                                                                                                                                                                                                                                                          • Honda Motor Co. Ltd (UK)
                                                                                                                                                                                                                                                          • Hyundai Car (UK) Ltd
                                                                                                                                                                                                                                                          • Kia Motors UK Ltd
                                                                                                                                                                                                                                                          • Mercedes-Benz UK
                                                                                                                                                                                                                                                          • Nissan Motor (GB) Ltd
                                                                                                                                                                                                                                                          • Peugeot Motor Company Plc
                                                                                                                                                                                                                                                          • Renault (UK) Ltd
                                                                                                                                                                                                                                                          • SEAT SA
                                                                                                                                                                                                                                                          • Skoda Auto a.s.
                                                                                                                                                                                                                                                          • Toyota (GB) PLC
                                                                                                                                                                                                                                                          • Vauxhall Motors Ltd

                                                                                                                                                                                                                                                          Car Purchasing Process - UK - April 2013

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