In the year 2019, a projection for the used car market was made for the year 2025; it was expected for the market to grow at a rate of 5.3% CAGR. The factors that led to this projection were availability of information for used cars on the internet, the demand for off-lease vehicles increased and people became more interested in car subscription services.

Factors fuelling the used car market

Several factors affected the used car market in the UK, all of which shaped the automotive industry, one way or the other, in a way that we are now getting used to. We will discuss all factors in detail below:

Impact of Brexit on the used car market
The decision of Brexit brought a lot of uncertainty for many. Many industries had to suffer because of the decision, but the industry majorly affected by Brexit was the automotive industry. The EU covers almost 80% and 52% of the UK's import and export vehicles, respectively. Since the EU referendum, new car dealerships and manufacturer businesses have suffered a lot.

As the value of the pound sterling was affected, automotive industry prices increased considering about 60% of automotive parts were imported from the EU. Almost eight out of 10 UKbuilt cars were exported pre Brexit and all the exported UK made cars were sold in the EU, all of which have been tremendously affected by Brexit. Overall, the number of new cars being made in the UK has dropped and the used car sector has gained a very promising position. Currently, consumers do not have any benefit per se of buying a used car other than the lower price. However, because, in the future, imported cars in the UK are expected to be extremely expensive, purchasing a used car becomes beneficial.

Import tariffs could double the listed price of the car, which would make it impossible for the average consumer to buy a new car. As compared with over two million sales of used cars in Q2 2018, the number only dropped by 0.4% in 2019 in spite of an increase in the interest rate. This clearly shows that the used car market is set in the right place. New car prices have been greatly impacted by the decision to leave the EU. However, the used car market has been in a very good position. Consumers prefer used cars because it offers them more value for money, trust and transparency. With prices of new cars being extremely high, people are looking for good quality used cars that will not require major repairs with expensive parts. The used car market seems to be in a very strong and stable position at the moment.

Limiting CO2 emissions regulations
Although petrol and diesel cars are still very much in demand, consumers have already started shifting their priorities towards electric vehicles. The world is undergoing tremendous climate change and many efforts are being made to shift consumers towards environmentally-friendly habits. The entire EU has set a target of limiting CO2 emissions and the automotive industry is one of the biggest contributors to the overall CO2 emission. Major targets have been set to reduce CO2 emissions by the year 2030 and automotive giants are expected to comply with these targets in order for them to be met. Helping the climate and the economy, the automotive industry is in for a test.

Shifting towards electric vehicles will bring on greater benefits to not just the environment but also consumers; for example, carbon dioxide reduction and a considerable cost reduction in many ways. However, the shift will take time. Major automotive giants have started the transition but it will be some time before everyone is on board. The target set for the UK to achieve a zero-carbon emission is by the year 2050. A ban on the sale of new petrol, diesel and hybrid cars will be implemented in order to achieve the set target. There is no integrated approach to limit CO2 emissions in the UK, similar to Europe. However, the UK has started monitoring the causes and limiting the sales of diesel cars as the biggest factor to limit the emissions.

The impact of Covid-19
The used car market in the UK has seen a series of highs and lows. The Coronavirus outbreak played a huge role in negating any sort of prior growth in the used car market. According to SMMT (Society of Motor Manufacturers and Traders), the growth of around 2.9% and 4% in January and February 2020, respectively, fell in March by -30.7% making it the lowest record since the outbreak of the virus. Spain saw the same shrinkage in the used car market for the first time since 2013 as a result of the halt in commercial activities arising from the state of alarm spread out in mid-March. However, in spite of the downfall in the used car market amidst the Covid-19 outbreak, the Q1 report of SMMT reported that the residual value of used cars has been stable or 0.3% higher than recorded before the lockdown was implemented.

Regardless of the conditions of the Covid-19 crisis, consumers are still searching for used cars online and looking forward to buying, at the right time. The severe downturn of used car sales in major European countries confirmed that this fall was not as bad as the slump in new car registrations, which declined by 61% by April 2020. With the relaxation in the lockdown restrictions and governments allowing auto manufacturers to start their operations again, a steady return in car sales has become prominent. The used car market is now soaring compared to new car registrations. Sale of used cars have increased by 13% in France and Germany, 9% in Italy and 6% in Spain. Residual value began climbing back up for most European countries as used car stock volume started decreasing. The increase in used car buying is reasonably higher than new car registrations and the factors are obvious.

Consumers are looking forward to good quality used cars because of a reasonable price and security of safe commute, considering the implications of using shared vehicles amidst Covid-19. The advantage is for both the auto leasing industries and the consumers making the used car market very prominent. The UK's used car market came out of the lockdown with a great zeal. In the first week of June 2020, sales of used cars increased by 3.4% as compared to the sales of the same period in 2019. Sales went up to around 12,000 cars sold per day. This led the prices of used cars to rise by 0.5%. The increase in demand of hybrid cars went up to 22%, diesel cars demand fell to 8%. The market shifted towards 6-9-year-old cars as well as 9-12-year-old cars, proving that the consumers are interested in older and cheaper used cars.

New and used car market in Europe during pandemic

Why is post Covid-19 a golden time for the used car market?
People are being financially cautious and are turning towards buying used cars as compared to new cars, which is also aggravated by the unavailability of the latter. People who used public transport are opting for a reasonable alternative, hence increasing the demand for used cars. Many countries started their incentive schemes, which have been affecting the price trend for the used car market. A decrease in plans for vacations in 2020 has also diverted attention towards buying used cars. It can be temporary but the patterns for buying cars have changed.

Although Covid-19 has created a global havoc on the auto industry, experts believe that the automobile industry will also soar because of the pandemic. The major reason is the sense of security people feel in their own vehicle. Auto sales dipped during Covid-19 to an extent that the automotive industry was barely breathing. Post lockdown, many countries created pent-up demand to increase auto sales. Pent-up demand is created to increase demand of goods and services when consumers are reluctant to purchase.

The UK and France enjoyed the hype received, which increased the residual value as compared to the RV in mid-May. The UK has been getting the same spotlight since the decision of moving out of the European Union came into question. The pent-up demand helped escalate auto sales post-lockdown and since Brexit. The head of product at Glass's said that the used and new cars stock in the UK is one of the biggest concerns. He said that because of the increased sales, the used car prices are skyrocketing and this is not expected to end soon. One of the biggest reasons for the used car market to be flourishing is because of the ambiguity of consumer's future choice between petrol, diesel and electric vehicles.

While the government has been imposing regulations on CO2 emissions and greener transport is in demand, electric vehicles are certainly more expensive than fuel emitting cars. Currently, there still seems to be a long way to go before electric vehicles stand in line with petrol and diesel cars. Some of the electric vehicles are entering the used car market; however, there is not a cheap option for consumers to shift to electric vehicles. In spite of all these factors, the market is yet to fully recover. In Italy, experts are waiting for a complete understanding of the economic crisis. The reason is that most people are expecting a second wave of the pandemic and another lockdown is speculated in the near future. The time for remarketing of used cars is at peak right now. Experts suggest that dealers should manage the used car business properly in these trying times, even when the future is uncertain, especially when new cars are being sold less than normal. As hygiene concerns rise, shared mobility, Mobility-as-aService, carpooling, public transport and so forth are probably in a very late recovery and will face a very steep decline.

This will give a boost to the used car market, subscription models and short-term leases. Consumers are looking forward to affordable and flexible commuting solutions, which can be availed by subscription models and short-term lease contracts. The used car leasing increase is supposed to grow year-on-year by 29.6%. As the spread of Covid-19 decreases, mobility service providers can get back on track; however, the road to recovery will be slow. E-commerce models and the digital used car market. Digitisation has been on peak amidst the Covid-19 lockdown. Businesses came out stronger when they had operations digitised. The pandemic brought a painful lesson for the automotive industry. The sales and marketing value chain has to be digitised in order to overcome the burden of the losses being faced. With no access to dealerships and showrooms, customers started focusing on e-commerce.

This pandemic proved that more and more digitally savvy customers wanted to purchase a vehicle and this increased competition to sell cars online. Many dealerships and OEMs have now started their operations online. OEMs and dealers began giving consumers more options such as test drives, vehicle inspections, abundant pictures of the vehicle, service maintenance information, etc. The used car consumer has become more educated as more technological benefits are made available to consumers through various information sources. Consumers want more innovative features, more transparency, easy transaction options, more feature recommendations, home delivery, and digital test drives, etc. While customers are more interested in digital and seamless services, not many dealers are on board with the idea of a digital future.

However, retailers are getting more interested in what consumers want and are aware of the purchase pattern of the customer. Because of the help of technology, retailers are adapting to the digital norms; for example, they are providing consumers with digital assistants, videos, more information on the vehicle, inventory options and more quality information so the customer can make informed decisions.

Future outlook.
The automotive industry of Europe has been under a lot of pressure. When the limits of CO2 emissions were imposed, manufacturers had to rethink their production. Fines imposed by the government on meeting the targets set to reduce CO2 emission has brought many challenges to the automotive industry. And this became part of a bigger problem, with more changes needing to be implemented as a result of Brexit. The auto industry is greatly affected by Brexit and there still are concerns whether a 'no deal' Brexit will affect the automotive sector or not. While this was still in dispute, Covid-19 hit the world.

No one had imagined how badly everything could be affected by a pandemic. Covid-19 has impacted the automotive industry in an unprecedented way. However, when all of the factors were combined, there was an opportunity for the used car market to rise. Consumers are more focused on buying used cars for several reasons and, hence, the used car market has been on an all-timehigh. The future of the used car market looks very bright no matter what hits Europe's automotive industry. The used car market has been well protected and is increasing in popularity with every passing day. The projection set for the global automobile leasing market by the end of 2030 is typically a genuine forecast anyone can imagine.

Due to Covid-19, the market fell at -35% CAGR from US$366.9bn in 2019 to US$239.6bn in 2020. However, the expectations for the market to grow back at CAGR 15.06% are not wrong. The leasing market is already back on track and is surely ready to meet expectations by 2023 of US$421.3bn. Later, to prove this to be the biggest return from any depression, the market will grow at 8.0% CAGR by 2030 to US$723.3bn. Growth has been subject to the demand in mobility, used cars, market trends and consumer awareness. The prediction of such high numbers is set because of the increase in the popularity of electric vehicles, digitalisation of the consumer purchase process, big data, IoT and blockchain investment. Whatever the factors or reasons for the growth of the used car market, we wish the automotive industry a smooth and steady path to growth.