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Use of the Internet in Car Buying - UK - May 2011

This report investigates the purchasing of cars other than through the traditional visit to a dealer or private seller. It includes the use of the internet to complete a sales transaction, such as via sites such as eBay Motors, as well as distance selling whereby the internet is used to allow a vehicle to be viewed prior to payment being taken via other methods such as the telephone.

To date the majority of sales made where the internet is used involves using it for online viewing or comparison purposes with the vehicle subsequently purchased following a viewing at a dealer or private seller. While this report excludes such traditional practices of vehicle purchase, it does present a review of the wider role that the internet is playing in the broader car purchasing market.

This report focuses on the sale of cars solely to private individuals. It includes both new and used car sales, and is exclusively focused on passenger vehicles.

The report specifically excludes sales to the trade, such as via car auction internet sites, as well as those made to businesses or operators of company car fleets.

Specifically excluded are the sale of cars through other ‘physical’ channels such as franchised new car dealers, independent dealers, car supermarkets and sales via private parties. Such channels may be discussed, however, in the context of their relationship with the internet and other non-physical channels.

With no accurate data on the profile of the internet available, all data presented in this report are Mintel’s best estimates. Sources, such as the Society of Motor Manufacturers and Traders (SMMT), are noted where used.

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Table of contents

  1. Introduction

      • Definitions
        • Abbreviations
        • Executive Summary

            • The Market
              • Figure 1: Internet and other distance automotive sales (000 units), 2009 and 2010
            • Role of non-traditional channels for buying cars remains small…
              • Market Factors
                • ... with sales badly affected by recent sluggish conditions in wider car market
                    • Figure 2: Monthly UK petrol, diesel and oil price trends, indexed, January 2009-January 2011
                  • Companies, Brands and Innovation
                    • Figure 3: Automotive websites receiving in excess of 1 million visitors, December 2010
                  • Internet is being exploited in a number of ways to sell vehicles although sites allowing consumers to purchase remain limited
                    • Interest in use of the internet to promote vehicles is growing although it too remains small
                      • Figure 4: Car advertising, % share by media type, internet vs. the rest, 2006-10
                    • The Consumer
                      • Figure 5: Dealer from which to buy the next car, February 2011
                    • Interest from consumers in non-traditional channels is currently focused on young men
                      • Figure 6: Type of car information looked for online, February 2011
                    • What we think
                    • Issues in the Market

                        • Where does the internet lie in relation to car purchase?
                          • Where does the internet fit within the research process?
                            • Which sources do consumers turn to for information on cars?
                              • What information do car buyers want to find online?
                                • Who is most interested in buying a car online?
                                • Future Opportunities

                                    • Trend: Click to Connect
                                      • Trend: Experience Is All
                                      • Internal Market Background

                                        • Key points
                                          • Car purchases suffer as the UK is hit by recession...
                                            • Figure 7: New car registrations and used car sales, 2006-11
                                          • ... although the market is set to improve
                                            • Figure 8: Intention for someone in the family to buy a car in the next 12 months, February 2011
                                          • Future new sales appear especially strong
                                            • The second-hand market is especially buoyant
                                              • Automotive websites expand opportunities for distance selling...
                                                • ...with auction sites growing in popularity
                                                  • Figure 9: Internet traffic on UK car auction websites, 2009 and 2010
                                                • Slow replacement cycles are an issue for the market
                                                  • Figure 10: When obtained (only car or most recently obtained car), 2010
                                                • Broadband penetration continues to expand
                                                  • Figure 11: Broadband penetration, by gender, age and social grade, 2005-10
                                                • Broadband penetration begins to slow...
                                                  • ... although opportunities still remain
                                                  • Broader Market Environment

                                                    • Key points
                                                      • Slowdown in economy hits consumer expenditure hard
                                                        • Figure 12: GDP quarterly percentage change, Q1 2005-Q4 2010
                                                      • Improvements in adults’ social grade should stimulate trading up
                                                        • Figure 13: Forecast adult population trends, by socio-economic group, 2005-15
                                                      • Ageing population may hamper the development of the internet
                                                        • Figure 14: Trends in the age structure of the UK population, 2005-15
                                                    • Strengths and Weaknesses in the Market

                                                      • Strengths
                                                        • Weaknesses
                                                        • Who’s Innovating?

                                                          • Key points
                                                            • Differentiation is key
                                                            • Competitive Context

                                                              • Key points
                                                                • Re-seller dominance restricts those looking to offer something different
                                                                  • Cars are an expensive luxury for many consumers
                                                                    • Figure 15: Consumer expenditure, by sector (£m), 2009
                                                                • Market Size and Forecast

                                                                  • Key points
                                                                    • A relatively small market
                                                                      • Figure 16: Estimated internet and other distance automotive sales (units), 2009 and 2010
                                                                    • Collapse of Autoquake signals all is not well for the sector
                                                                      • Tesco – a new dawn?
                                                                        • The future
                                                                        • Advertising and Promotion

                                                                          • Key points
                                                                            • Car advertising suffers as recession sweeps market
                                                                              • Figure 17: Main media advertising expenditure on cars, 2006-10
                                                                            • Total advertising expenditure falls back
                                                                              • Internet advertising strengthens its share within the market
                                                                                • Television and press dominate overall expenditure
                                                                                  • Figure 18: Main media advertising expenditure on cars, % share by media type, 2006-10
                                                                                • Mass market manufacturers dominate overall advertising expenditure
                                                                                  • Figure 19: Leading car advertisers, (cumulative spend of £50,000 or more), 2006-10
                                                                                • Small cars receive most promotional support
                                                                                  • Figure 20: Top car models advertised (cumulative spend of £20,000 or more) during 2006-10
                                                                                • Leading automotive internet sites
                                                                                  • Figure 21: Automotive Websites receiving in excess of 1 million visits (December 2010)
                                                                                • Intermediaries and information websites dominate
                                                                                  • Only one notable transactional site
                                                                                  • Leading Companies

                                                                                    • Key points
                                                                                      • Transactional Sites
                                                                                        • eBay Motors
                                                                                          • Online presence/services
                                                                                            • Market positioning
                                                                                              • Products
                                                                                                • Pricing
                                                                                                  • eBid
                                                                                                    • Online presence/services
                                                                                                      • Market positioning
                                                                                                        • Products
                                                                                                          • Pricing
                                                                                                            • AutoeBid.com
                                                                                                              • Online presence/services
                                                                                                                • Reverse auction process
                                                                                                                  • Market positioning
                                                                                                                    • Products
                                                                                                                      • Pricing
                                                                                                                        • Tesco Cars
                                                                                                                          • Online presence/services
                                                                                                                            • Market positioning
                                                                                                                              • Products
                                                                                                                                • Pricing
                                                                                                                                  • Other news
                                                                                                                                    • Intermediary sites
                                                                                                                                      • Independent intermediaries
                                                                                                                                        • Figure 22: Independent intermediary automotive websites (UK) receiving in excess of 50,000 visits (December 2010)
                                                                                                                                      • Dealer Intermediaries
                                                                                                                                        • Figure 23: Dealer-operated intermediary automotive websites (UK) receiving in excess of 50,000 visits (December 2010)
                                                                                                                                    • The Consumer – Purchase Intentions in Next 12 Months

                                                                                                                                      • Key points
                                                                                                                                        • Short-term market for car purchasing looks buoyant
                                                                                                                                          • Figure 24: Intention for someone in the family to buy a car in the next 12 months, February 2011
                                                                                                                                        • Income of purchaser a major factor when considering the purchase of a car
                                                                                                                                          • First-time buyers more likely to purchase used...
                                                                                                                                            • ... while men show stronger interest in buying new
                                                                                                                                              • Price is uppermost when purchasing a car
                                                                                                                                                • Figure 25: Important criteria influencing choice of car, February 2011
                                                                                                                                              • Price, reliability and fuel consumption most important
                                                                                                                                                • Features that enhance a customer’s experience of the vehicle are rated highly
                                                                                                                                                  • Men and women look for different factors when purchasing
                                                                                                                                                    • Older drivers are less inclined to be swayed by branding
                                                                                                                                                      • Price is key for those in the lowest socio-economic groups
                                                                                                                                                        • Used buyers are driven by costs
                                                                                                                                                          • Figure 26: Important criteria when choosing to buy a car, by purchase intention in the next 12 months, February 2011
                                                                                                                                                      • The Consumer – Where a Car is Purchased

                                                                                                                                                        • Key points
                                                                                                                                                          • Dealers dominate and stifle other purchasing channels
                                                                                                                                                              • Figure 27: Where next car would be bought, February 2011
                                                                                                                                                            • Dealers dominate in terms of future car sales
                                                                                                                                                              • Indecision presents an opportunity however for other channels
                                                                                                                                                                • Young buyers show a strong interest in purchasing online
                                                                                                                                                                  • Car supermarkets and online auctions appeal more to men
                                                                                                                                                                    • Online appeals to almost one in ten
                                                                                                                                                                      • Figure 28: Where next car would be bought, by intention to buy a new or second-hand car in the next 12 months, February 2011
                                                                                                                                                                    • Auction sites attract those looking to spend the least
                                                                                                                                                                      • Figure 29: Where next car would be bought, by total cost of the car, February 2011
                                                                                                                                                                      • Figure 30: Where next car would be bought, by total cost of the car, February 2011 (contd)
                                                                                                                                                                  • The Consumer – The Research Process

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Time spent on research
                                                                                                                                                                        • Purchasing a car can be a lengthy process
                                                                                                                                                                          • Figure 31: Duration of research before purchasing the next car, February 2011
                                                                                                                                                                        • A third of purchasers spend 2-3 months researching their car purchase
                                                                                                                                                                          • Wealthier buyers spend more time undertaking research...
                                                                                                                                                                            • ... although those spending the most time tend to be the lowest earners
                                                                                                                                                                              • Those buying new are more likely to invest time in researching their vehicle
                                                                                                                                                                                • Figure 32: Duration of research before purchasing the next car, by intention to buy a new or second-hand car in the next 12 months, February 2011
                                                                                                                                                                              • More money spent equates to more time spent on research
                                                                                                                                                                                • Figure 33: Duration of research before purchasing the next car by total cost of the car, February 2011
                                                                                                                                                                              • Research sources
                                                                                                                                                                                • Internet lags behind more personal sources of information
                                                                                                                                                                                  • Figure 34: Resources used for researching which vehicle to buy, February 2011
                                                                                                                                                                                • Personal opinions are viewed with greatest importance
                                                                                                                                                                                  • New media is beginning to have an impact on research
                                                                                                                                                                                    • Wealthier buyers find interest in reputable websites
                                                                                                                                                                                      • Women fail to be impressed by the internet revolution
                                                                                                                                                                                        • Buyers of new cars are more likely to look for formal reviews
                                                                                                                                                                                          • Figure 35: Resources used for researching which vehicle to be bought, by intention to buy a new or second hand car in next 12 month, February 2011
                                                                                                                                                                                        • Those spending most rely on a variety of resources
                                                                                                                                                                                          • Figure 36: Resources used for researching which vehicle to be bought by total cost of the car, February 2011
                                                                                                                                                                                          • Figure 37: Resources used for researching which vehicle to be bought by total cost of the car, February 2011 (contd)
                                                                                                                                                                                      • The Consumer – Type of Information Looked for Online

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Online resources act as a price check tool for many
                                                                                                                                                                                            • Figure 38: Type of information looked for online, February 2011
                                                                                                                                                                                          • Men look for goodies while women go for safety, with costs important for both
                                                                                                                                                                                            • Wealthier individuals have greater information needs
                                                                                                                                                                                              • New and used buyers look for different things online
                                                                                                                                                                                                • Figure 39: Type of information one would look for online by Intention for someone in the family to buy a car in the next 12 months, February 2011
                                                                                                                                                                                              • Those spending most on a vehicle look for more information
                                                                                                                                                                                                • Figure 40: Type of information one would look for online by total cost of the car, February 2011
                                                                                                                                                                                                • Figure 41: Type of information one would look for online by total cost of the car, February 2011 (contd)
                                                                                                                                                                                              • Big spenders do their research...
                                                                                                                                                                                                • ... and focus more on non price factors
                                                                                                                                                                                                • The Consumer – Pre-purchase Activity

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Just one in seven totally reject buying on the internet
                                                                                                                                                                                                        • Figure 42: Pre-purchase activity, February 2011
                                                                                                                                                                                                      • Traditional methods of researching and purchasing dominate thinking
                                                                                                                                                                                                        • Internet has niche interest with potential for mainstream appeal
                                                                                                                                                                                                          • Young men are key target for those offering cars on the internet
                                                                                                                                                                                                            • Income is no option to internet buyers
                                                                                                                                                                                                              • Dealership research is especially important to those buying a new car
                                                                                                                                                                                                                • Figure 43: Attitudes towards buying the next car by intention for someone in the family to buy a new or second hand car in the next 12 months, February 2011
                                                                                                                                                                                                              • Dealers are one of many channels used by new car buyers
                                                                                                                                                                                                                • Used buyers need to see what they will buy
                                                                                                                                                                                                                  • Cars costing the least are likely purchases for those using the net
                                                                                                                                                                                                                    • Figure 44: Attitudes towards buying the next car by total cost of the car, February 2011
                                                                                                                                                                                                                    • Figure 45: Attitudes towards buying the next car by total cost of the car, February 2011 (contd)
                                                                                                                                                                                                                  • Internet has potential to replace informal opinions from family and friends
                                                                                                                                                                                                                    • Internet can also assist those researching more expensive cars
                                                                                                                                                                                                                    • Appendix – Consumer – Purchase Intentions in Next 12 Months

                                                                                                                                                                                                                      • Consumer appendices
                                                                                                                                                                                                                        • Figure 46: Intention for someone in the family to buy a car in the next 12 months by demographics, February 2011
                                                                                                                                                                                                                    • Appendix – Consumer – Where a Car is Purchased

                                                                                                                                                                                                                        • Figure 47: Dealer from whom to buy the next car by demographics, February 2011
                                                                                                                                                                                                                    • Appendix – Consumer – The Research Process

                                                                                                                                                                                                                        • Figure 48: Duration of research before purchasing the next car by demographics, February 2011
                                                                                                                                                                                                                        • Figure 49: Resources used for researching which vehicle to be bought by demographics, February 2011
                                                                                                                                                                                                                        • Figure 50: Most popular resources used for researching which vehicle to be bought, by demographics, February 2011
                                                                                                                                                                                                                        • Figure 51: Next most popular resources used for researching which vehicle to be bought by demographics, February 2011
                                                                                                                                                                                                                    • Appendix – Consumer – Pre-purchase Activity

                                                                                                                                                                                                                        • Figure 52: Agreement towards statement ‘i will do a lot of my research into which make and model to buy on the internet’, by demographics, February 2011
                                                                                                                                                                                                                        • Figure 53: Agreement towards statement ‘I will spend quite a lot of time visiting dealerships researching which make and model to buy ‘ by demographics, February 2011
                                                                                                                                                                                                                        • Figure 54: Agreement towards ‘i will seek out the opinion of well-informed friends, relatives and others who know about cars’ by demographics, February 2011
                                                                                                                                                                                                                        • Figure 55: Agreement towards ‘i don’t want to spend lots of time researching the best make, model and deal buying the next car’, by demographics, February 2011
                                                                                                                                                                                                                        • Figure 56: Agreement towards ‘i would consider purchasing a car on the internet’, by demographics, February 2011
                                                                                                                                                                                                                        • Figure 57: Agreement towards ‘i would always want to speak to the seller before buying a car‘, by demographics, February 2011
                                                                                                                                                                                                                        • Figure 58: Agreement towards statement ‘i would consider buying a car without having seen it first’, by demographics, February 2011
                                                                                                                                                                                                                    • Appendix – Type of Information Looked for Online

                                                                                                                                                                                                                        • Figure 59: Most popular type of information one would look for online, by demographics, February 2011
                                                                                                                                                                                                                        • Figure 60: Next most popular type of information one would look for online, by demographics, February 2011

                                                                                                                                                                                                                    Companies Covered

                                                                                                                                                                                                                    • Arnold Clark Automobiles Ltd
                                                                                                                                                                                                                    • Automobile Association (AA)
                                                                                                                                                                                                                    • Ford Motor Company Limited (UK)
                                                                                                                                                                                                                    • Google UK
                                                                                                                                                                                                                    • Government Actuary's Department (GAD)
                                                                                                                                                                                                                    • Hyundai Car (UK) Ltd
                                                                                                                                                                                                                    • Kantar Media
                                                                                                                                                                                                                    • Kia Motors UK Ltd
                                                                                                                                                                                                                    • Mazda Motors UK Ltd
                                                                                                                                                                                                                    • Mercedes-Benz UK
                                                                                                                                                                                                                    • Nissan Motor (GB) Ltd
                                                                                                                                                                                                                    • Office for National Statistics
                                                                                                                                                                                                                    • PayPal Inc.
                                                                                                                                                                                                                    • Peugeot Motor Company Plc
                                                                                                                                                                                                                    • Renault (UK) Ltd
                                                                                                                                                                                                                    • Society of Motor Manufacturers and Traders
                                                                                                                                                                                                                    • Tesco Plc
                                                                                                                                                                                                                    • Toyota (GB) PLC
                                                                                                                                                                                                                    • Trader Media Group Ltd.
                                                                                                                                                                                                                    • Vauxhall Motors Ltd
                                                                                                                                                                                                                    • Volkswagen UK

                                                                                                                                                                                                                    Use of the Internet in Car Buying - UK - May 2011

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