Motorpoint warns inflation will put brakes on car sales

THE boom in the used car market that began at the start of the pandemic is coming to an end as soaring energy bills squeeze budgets, one of Britain’s biggest car retailers has said.

Used car dealer Motorpoint has told investors to brace for a slowdown in sales as customers grapple with rising bills.

Car dealers enjoyed a record 2021 as the supply of new cars dried up. Soaring demand meant record valuations for used cars, the prices of which rose in every one of the last 26 months. That fed through into higher commissions for sellers.

But dwindling spending money for households will soon lead to a demand crunch whether the supply of cars improves or not, Motorpoint warned.

The company said: “The impacts of rising inflation and worldwide vehicle supply chain challenges are likely to continue to affect our markets and all industry participants.

“In general, rising inflation is putting increasing pressure on discretionary spending power and consumer sentiment, and this position has worsened since the start of our new financial year. This is very likely to reduce overall sales and transactions in our markets.”

Motorpoint’s share price slumped 5.5pc on the warning. The supply problems plaguing the new car market will cut the supply of used cars and ultimately lead to “aggressive” price competition, the company said.

In a swipe at new firms trying to disrupt the market, it said: “Several other large and well-capitalised players are entering our markets and competing aggressively, albeit not all of them are proving successful business models.”

App-based used car dealer Cazoo recently said it would cut 750 jobs and beat a hasty retreat from the new car leasing business, a market it had poured millions of pounds into. Rival Carzam went bust two weeks ago just 18 months after launching.

Motorpoint’s warning comes in the wake of an unexpected drop in US retail sales, led by car sales. Auto sales fell 3.5pc in May compared to April.

Motorpoint, which sells used cars that are up to three years old, said sales for the year to the end of March rose 83pc to a record of £1.32bn, while profit before tax more than doubled to £21.5m.

‘Rising inflation is putting increasing pressure on discretionary spending and consumer sentiment’