Internet has revolutionised second-hand car process

According to Auto Trader Group, Britain’s biggest online used-car marketplace, well over half of consumers now make only a single visit to a car lot, having already chosen their vehicle online.

The company, which has reported stronger-than-expected advertising revenues for the past four months, said consumers spent an average of 11 hours browsing the web before finding the right car, forcing retailers to implement “multichannel approaches”.

Auto Trader shares, which floated at 235p in March, rose by a further 10¼p, or 2.8 per cent, to 371½p after it forecast that profits would be “marginally ahead of current market expectations”.

In an unscheduled stock market update, the group said that although the number of retailer forecourts advertising on its website since the end of September had remained “broadly flat”, average revenues per forecourt had been stronger than anticipated.

The FTSE 250 company said its consumer services division, which sells products including insurance, loan finance and private number plates as well as car ads for individuals rather than retailers, had also outpaced expectations.

It added: “Costs have been well managed and this combination has led to further margin increases. Furthermore, profits continue to be converted into cash at a high level, thereby facilitating the planned reduction in net debt.”

Auto Trader forecast that underlying operating profits for the full year would be between £169 million and £171 million, compared with expectations of about £164 million.

Analysts reacted by upping the ante on predicted full-year revenues, with Numis raising its forecast from flat to growth of 4 per cent to £279.2 million.

The group, which in November declared a maiden interim dividend of 0.5p after a 17 per cent jump in half-year profits, said the board “continues to be positive about the trading environment in which the group operates”.

Auto Trader’s strong trading follows a sustained period of growth for both the new and used car markets. New car registrations hit a record 2.6 million in 2015, the fourth consecutive year of growth, with demand for alternative-fuel vehicles growing by 40 per cent. The growth of the new car market had a knock-on effect on the used car market last year, which at 7.3 million was the highest level since 2008.

At its half-year results, Auto Trader said that it had listed an average of 427,000 cars on its website in the six months to the end of September, compared with 409,000 previously. The number of retailer forecourts using its website rose from 13,456 to 13,503.

Auto Trader’s strong update came a day after Pendragon, the biggest automotive online retailer, reported an 11 per cent jump in 2015 sales to £4.45 billion and record profits of £15 million from used vehicles, also up 11 per cent.

Figures this month from the Society of Motor Manufacturers and Traders suggest that car showrooms had their busiest January since 2005 as motorists moved to lock into cheap financing packages. New car sales rose by 2.9 per cent to nearly 170,000.

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