Car dealers lost £1.7 billion in revenues in 2008 as 360,000 fewer used vehicles moved off the forecourts, a report has revealed.

Total revenues from used car sales fell to £24 billion, the lowest figure since 2004, while volumes of 3.67 million were at a six-year low, according to BCA’s 2009 Used Car Market Report.

The losses could have been much greater but for the fact that buyers moved towards younger, higher-value vehicles which saw the average price rise from £6,464 in 2007 to £6,641 in 2008.

BCA (British Car Auctions) said the one bright spot for dealers in 2008 was the small increase in sales of cars newer than two years old, which edged up 0.3 per cent to 856,000. Its’ effect in an otherwise falling market was to stem some of the losses generated by fewer sales of three-to-five year-old cars (down 5.2 per cent and 80,000 units to 1.46 million) and in the six-to-eight year segment where dealer volumes slid by 19.2 per cent to 780,000 units, taking their share down to 49.1 per cent.

Dealers also saw their new car market revenue fall from a record high of £33 billion in 2007 to £28.1 billion last year as volumes dropped to their lowest point for 12 years and more car buyers opted for smaller, lower-priced models.

In total, dealers’ combined turnover from car sales fell by £7.6 billion in 2008 compared with the previous year.

In contrast, the private-to-private sector’s share of the used car markete rose by £1 billion to £7 billion from 2.69 millioncar sales. Private-to-private selling prices were also higher in 2008, rising to £2,581 from £2,179 in 2007, as the private sector increased its share of the market for six-to-eight year-old cars.

Report author Peter Cooke said: “This year’s BCA Report shows a motor industry in recession; a recession that has hit the used car market and the new car market.

“However, this is perhaps different to any previous recession in that it is principally man-made; created through a lack of credit for goods and services, rather than a lack of demand for products.

“The combined market for new and used cars has dropped, even from the lower 2007 volumes reported last year. In 2008, the value of the used car market was some £4 billion higher than the new car market; a clear message that buyers will move from buying a new car to a used car in times of recession.

“Even so, the general slowing down in the velocity of business last year implies lower profit opportunities across the sector.”

Looking ahead, the BCA report suggests the drop in new car volumes means there will be a significant fall in the number of younger used cars coming to the market in the next two to three years – significantly less than the used car market would conventionally be able to absorb.

A steady decline in used car volumes, particularly in the younger segments, will almost inevitably continue as the car parc shrinks and changes shape. This, in turn, will mean that used car retailers will need to seek to enhance their value added and profitability per unit, if they are to remain economically viable.

A further phenomenon, partly caused by recession, is the growth in private-to-private sales shown in this year’s report.

While one might expect a growth in a “grey market” in a period of recession, this throws the gauntlet down to the professional sellers in the field, the report says, going on to ask: “What might used car retailers do to recoup their share of the market?”