The document summarizes the results of a survey of 5,000 consumers conducted by Auto Trader to understand consumer sentiment and how the car market may change. Key findings include: consumer confidence is stronger than a year ago, but new car registrations are still forecast to decline; many consumers are confused about the upcoming VAT increase; and having the right car at the right price and trusting the dealership are top priorities for consumers. The report provides recommendations to dealers on how to adapt to changes in consumer preferences, such as focusing on trust, reputation, and online presence.

1. Consumer Feedback on Key Questions
Facing the Industry
Tim Peake
Commercial Director
29th September 2010

2. Summary
• Auto Trader collected key questions / concerns from dealers at the beginning of September 2010
• These questions were analysed and the top 15 were incorporated into a survey
• The survey was placed on the Auto Trader Website
• 5,000 consumers responded to the survey between 15th September to 25th September 2010
• The following slides summarise the answers from these consumers
• The report is intended to help dealers understand how the market may change based on current consumer
sentiment. It will hopefully drive some useful debates within your dealership.
• If you have any further questions or would like further detail / discussions on some of the possible implications
this report outlines, please contact Tim Peake:
Research Audit &
•
Repository Update tim.peake@tradermedia.co.uk
Email;
• 2
Slide Phone: 01189 239 103

3. Consumers confidence is stronger now than 12 months
700,000 more consumers seeking to change their car (based
on Auto Trader 10m unique users)
September 2009 September 2010
800,000
consumers
950,000
2.4 million 1.7 million consumers
consumers consumers
6.4 million 7 million
consumers consumers
Research Audit &
Repository Update
Slide 3

4. The impact of this improvement in confidence is not clearly
feeding through into NCR forecasts for next year, with SMMT
forecasting 2.5% decline
New Car Registrations
New Car Registrations
20 %
Forecast by SMMT
H1 – First Half of the Year
3,000,000
-2.5 %
1,400,000
1.2 %
5.1 %
2,500,000
1,296,486
1,200,000 1,267,299
1,247,479
1,241,921
2,439,718
2,404,007
2,344,864
1,108,662
1,000,000
2,000,000
2,131,795
2,069,000
2,018,000
1,994,999
924,955
1,968,000
800,000
1,500,000
600,000
400,000 1,000,000
200,000
500,000
0
H105 H106 H107 H107 H109 H110 0
2005 2006 2007 2008 2009 2010f 2011f 2012f
It is likely that the second half of 2010 will be down
Research Audit & year-on-year as it laps Scrappage Scheme impact.
Repository Update
Slide 4

5. This may be partly explained by Consumers being confused
about the impact of changes in VAT
“Will the VAT increase in January 2011 affect your decision to buy a new/used car?”
Research Audit &
Repository Update
Slide 5

6. VAT confusion is leading to consumers bringing forward
their purchase
“How will the VAT increase affect your decision to buy a new/used car?”¹ (September 2010)
Planning to buy new car Planning to buy used car
Research Audit &
Repository Update
Slide 6

7. VAT created a pull forward in demand in the German market when they increased
VAT. VAT increased in Jan 2007, demand in Q4 2006 increased and subsequently
NCR in the following year declined
January 2007 VAT Increase in Germany (from 16% to 19%) created a dip in purchases post the tax increase day (Q1 down by 10% YoY, Q2
and Q3 -6% and Q4 -13% YoY).
German New Car Registrations SIS Impact
January 2007 VAT Increase
Impact 45%
375,000
35%
275,000
25%
175,000
15%
75,000
5%
-25,000
Jan-06
Mar-06
May-06
Nov-06
Jan-07
Mar-07
May-07
Nov-07
Jan-08
Mar-08
May-08
Nov-08
Jan-09
Mar-09
May-09
Nov-09
Jul-06
Sep-06
Jul-07
Sep-07
Jul-08
Sep-08
Jul-09
Sep-09
-5%
-125,000 -15%
-225,000 -25%
Research Audit & New Car Registrations YoY %
Repository Update
Slide 7
Source: ACEA (equivalent SMMT in Europe)

8. Having the right car at the right price is key to winning new
business
What are the 3 most important criteria when deciding to purchase?
Research Audit &
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Slide 8

9. The Right Car….is more difficult to source given historic
declines in NCR are leading to an aging car parc.
Competition between dealer segments is increasing
Franchise Stock Distribution on AutoTrader.co.uk
Franchised Stock Distribution by Age March 2009
45% Franchised Stock Distribution by Age July 2009
Franchised Stock Distribution by Age March 2010
40% Franchised Stock Distribution by Age July 2010
40.5%
39.8%
39.2%
35%
35.6%
34.1%
30%
30.2%
28.0%
25%
23.9%
20%
20.3%
15%
15.5%
15.3%
15.2%
14.6%
Research Audit &
12.5%
Repository Update
10%
Slide 9
5%
5.6%
5.1%
5.0%
4.4%
2.0%
1.8%
2.2%
2.0%
3.8%
3.5%
0%
0-1 YEARS 2-3 YEARS 4-5 YEARS 6-7 YEARS 8+ YEARS UNLISTED
Source: Internal Data

10. The Right Price…..majority of consumers are not prepared
to pay a premium for buying from a franchise dealer
Are you prepared to pay a premium from buying
from a franchise dealer?
39% Yes
61% No
Research Audit &
Repository Update
Slide 10

11. The Right Price….there are regional differences in terms of
what Consumers are prepared to pay as a premium from a
franchise dealer
Research Audit &
Repository Update
Slide 11

12. The Right Price…..of the 39% that are prepared to pay a
premium 75% are prepared to pay up to £299 and 25% are
prepared to pay more than £299
More than £500
extra
10%
An
additional An additional
£300 - £500 £0 - £99
16% 29%
An additional
£200 - £299 An additional
21% £100 - £199
25%
Research Audit &
Repository Update
Slide 12

13. However Franchise dealers price is £500+ more than Independents.
As Franchise move into older age stock the price differential has been
decreasing (last yr vs, this yr)
Average Price of Car by Stock Band
£16,000 July 2009
£14,000
£14,808
£14,556
£12,000
£12,467
£10,000 Franchised - Average Car Price July 2009
£10,787
£10,127
£8,000 £5,963 Independent - Average Car Price July 2009
£7,726
£6,000
£7,098
£6,504
£5,429
£4,000 Jul 2009 Fr-Ind Price Difference
£4,763
£4,326
£3,348
£2,000
£0
-£252 £660 £628 £666 £977
-£2,000 0-1 YEARS 2-3 YEARS 4-5 YEARS 6-7 YEARS 8+ YEARS
Average Price of Car by Stock Band
£20,000 July 2010
£15,000
£16,111
£15,450
Research Audit & £12,787 Franchised - Average Car Price July 2010
£10,000
£11,598
Repository Update
£10,806
£5,770
£9,060
Independent - Average Car Price July 2010
£8,291
Slide 13
£7,017
£5,000
£6,329
£5,630
£4,734
£3,681
July 2010 Fr-Ind Price Difference
£0
-£661 £792 £769 £699 £1,053
0-1 YEARS 2-3 YEARS 4-5 YEARS 6-7 YEARS 8+ YEARS
-£5,000

14. Furthermore the majority of consumers are searching on a national basis and hence
are exposed to “national prices”. Hence understanding price specifically is key.
Furthermore communicating points of differentiation are even more important
given price transparency (e.g. Trust, Reputation, other products / services).
Search radius AT.co.uk Consumers who selected a radius when searching
on AT.co.uk (i.e. did not default search to
National)
Research Audit &
Repository Update
Slide 14

15. Pricing tools are going to become even more important. Market
Tracker provides visibility of AT advertised price, CAP retail and CAP
Trade prices and is updated daily (with AT prices)
Price distribution for Ford Focus 1.6 Zetec 5 dr (climate pack) 07 Plate
Research Audit &
Repository Update
Slide 15

16. An example of innovation in products and services to build trust is Guaranteed
Buy Back. Of the 17% of consumers who were not planning to buy a car in the
next 12 months, 58% could change their mind if a dealer guaranteed to buy back
their car. Hence using products to build Trust can pull in more consumers
“If a dealer guaranteed to buy back your car for an agreed price in the future, would this influence your decision
to purchase?”
287,000
consumers
721,000
consumers
691,000
consumers
Research Audit &
Repository Update
Slide 16

17. The majority of Consumers visit between 2-3 dealerships when making a
purchase decision
9% of consumers will not visit a dealership, suggesting they buy from Friends,
family or get someone else to conclude the transaction (could also be online
opportunity)
Research Audit &
Repository Update
Slide 17

18. Consumers, when choosing a dealership value reputation, trust and knowledgeable
sales staff (enhances trust)
Pushing manufacturer brands would allow Franchise to win in their segment (1-3 yr
old cars), whilst Independents can price competitively in older age vehicles
“What is the most important quality you look for in a dealership?”
Research Audit &
Repository Update
Slide 18

19. Consumers are agnostic to dealer brands - 65% outlined the dealer brand is
unimportant
Does dealer branding influence which dealership you buy from?
Research Audit &
Repository Update
Slide 19
Source: 1. Top 10 Dealer Concerns Survey launched on autotrader.co.uk September 2010

20. Franchise and Independent need to focus on what differentiates
them to win different types of consumers in the next 12 months
Franchise
• Price premium achievement is more likely if messaging is based on:
• Trust – manufacturer brand vs. dealer brand vs group – be clear on the value of these
• Reputation – consumer user reviews
• Additional Products – buy back for guaranteed price, increases consumer demand and demand that can
be fulfilled via franchise dealers
• Knowledgeable sales staff
• What justifies the premium (warranty, checks, approved used schemes)
• After sales service
• Consistent brand messages
• Pricing tools critical
• Independent
• Priced competitively, acknowledging national price transparency
• Pricing tools critical
• Trust, knowledgeable sales staff just as important (£425 spent on used cars after purchase to rectify
Research Audit &
problems)
Repository Update
Slide 20
• Ageing car parc, similarities in stock profile make the importance of these points of differentiation critical in
the next 12 months

21. Creating trust through your website
Research Audit &
Repository Update
Slide 21

22. Communicating trust via online stock
advertising
Research Audit &
Repository Update
Slide 22

23. Doing the basics well
Research Audit &
Repository Update
Slide 23

24. 33% of consumers are already prepared to order their new car
(used and new) online….that’s potentially 3.3m transactions
“Would you like to be able to order your new car online?”
3.3 million
consumers
6.3 million
consumers
Research Audit &
Repository Update
Slide 24 Do sales staff seek to close the transaction on the phone
or do they try and encourage the consumer into the show
room?

25. There are regional differences, with 38% of consumers in
London and the South East most likely to order a vehicle
online
“Would you like to be able to order your new car online?”
Research Audit &
Repository Update
Slide 25

26. 27% of Consumers are willing to purchase their car online
“Would you consider buying a used car that you have seen online without physically seeing it?”
Research Audit &
Repository Update
Slide 26 How would this position change if Dealer branding
focused on Trust?

27. Maximising the opportunity in the next 12
months
There is potentially a large appetite to begin transacting online
The assets required to unlock the opportunity are:
Right car, right price (or justification of the right price)
Reputation, Trust , knowledgeable sales staff
These are the same attributes that consumers value when choosing a
dealership offline
However consumers do not associate these assets with specific dealer brands
Hence the majority are not prepared (or do not necessarily see the benefit) to
pay a premium from a franchise dealer (or pay more from one franchise dealer
Research Audit &
thanRepository Update
another)
Slide 27

28. Maximising the opportunity in the next 12
months
However
Trust is built through clear brand messaging (manufacturer brands, groups, dealers - what role
should each play?)
Investment in optimising online advertising is key
Doing the basics well (photos, clear messaging, brand values)
Communicate trust on everything you do - all your advertising
Don’t be afraid of user reviews, consumers are more generous than you think
Re-align your thinking on brand
Focus on evolution of products – e.g. guarantee buy-back, builds trust
Fundamentally the market has already changed
The key is to unlock the opportunity by changing the business model to benefit from
the new landscape
Research Audit &
Repository Update
Slide 28