Car Ownership and Purchasing in Europe - August 2009

The collapse in car sales in Europe in 2008 led to the introduction of car sales and scrappage incentive schemes which have to date been introduced in each of the four markets analysed in this report. Similar schemes introduced by France in the mid 90s indicate that when the schemes end, sales fall back to pre-incentive levels. The report looks at what the impact of the scrappage schemes have been on the car markets in Germany, France the UK and Spain.

Purchases of new cars in each of the four countries analysed by the report are generally skewed to the over 45 age and lifestage groups while used car purchases purchases are skewed to the under 45 age and lifestage groups. This is largely due to incomes and wealth which tend to be higher later in life which facilitates new car purchases and demotes less less affluent younger age and lifestage groups to used car purchases.

The purchase incentive schemes are likely to have pulled forward orders for new cars that would have been placed anyway had the schemes not been in place, and also to have released pent up demand from orders deferred during the recession. The schemes though are targeted ay owners of cars over nine years old, a high proportion of which will be owners of used cars. The schemes therefore will have been successful at converting formerly used car owners into new car buyers.

The report argues that simply introducing blanket incentives for new cars, incentives such as the scrappage schemes should be targeted at specific age and lifestage groups who would like to purchase new but purchase used for reasons of affordability. This would bring new age and lifestage customers into the new car market from the used car market and a target market that would be the prime opportunity for targeted incentives would be married couples and families.

The consumer research on car purchase prices show that more than one third of used cars and one third of new cars are purchased in Germany, France, the UK and Spain combined for between €7,500 and €14,999. This large price-point overlap shows that there is an opportunity for the industry to convert a large number of used car buyers into becoming purchasers of new cars.

Car replacement cycles are lengthening in Europe, particularly in Germany and France where around 30% of households are replacing a car only every five years or more. This is mainly because of the high cost of purchase and for replacement car buyers which form the largest proportion of purchases, depreciation results in a high funding gap. The report shows that the industry needs to develop alternatives to outright purchase and purchasing using credit finance in order to shorten replacement cycles.

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