‘The Future of Motoring’ Q4 2012

Auto Trader Owners’ Guide:

CONTENTS Introduction 3

Key findings 4

Long road to recovery 5

Young drivers at risk 6 & 7 Top tips to help young drivers reduce costs 8 Cost of motoring set to soar 9 & 10 Motorists forced to adapt to rising costs 11 Future of motoring 12

Cars of 2023 13 - 15

About Auto Trader 16

2

Welcome to the Auto Trader Owners’ Guide ‘Future of Motoring’ report, which this quarter explores the anticipated evolution in motoring over the years to come. We have surveyed 3,495 motorists to gauge their views on what the future of motoring has in store, looking at everything from soaring running costs to the possibility of flying cars. We have also worked with Futurologist Ian Pearson whose insights and predictions have helped shape this report. Motoring as we know it is set to change drastically over the next ten years as a direct result of economic, technological and demographic changes. Although Britain may have come out of the double-dip recession, the financial squeeze continues to be felt across all aspects of 21st century life. The younger generation are the most at risk, faced with limited personal finances, a crippling rate of youth unemployment and constant price hikes to the cost of motoring.

Although economic recovery will be slow, companies – not just automotive – are heavily investing in research and development, so we can expect significant technological advancements that will considerably change how we drive over the coming years. Trials are already underway for a new era of motoring; this includes self-driving technology, a concept that is expected to be a common feature on our roads in as little as ten years time.

Futurologist Ian Pearson believes that gradually cars will become smart enough to do all the hard work for us: drive us from A to B, reduce accidents and comply with speed limits and other road laws. As electronic control of cars is likely to eventually become mandatory, this is sure to have a major impact not only on motorists but across all areas of transportation.

Motorists will be forced to adapt their current driving behaviours if they are to keep up with constant increases to the cost of motoring and to make way for new technological developments. One thing we can be sure of is that a new dawn of motoring is fast approaching.

3

Nathan CoeGroup Director, Auto Trader

INTRODUCTION

expect self-driving cars to be a common feature on UK roads by 2023

of motorists believe they could not afford to be a first time driver today

anticipate cars will be able to communicate with each other

within the next ten years

think the government is not doing enough to support road users of the future

42%

55%

the amount motoring costs in the UK could reach by 2023 £135bn

62%

98%

KEy FINDINGS

4

Although the Auto Trader Retail Price Index reveals the average asking price of a car has increased in the latter half of 2012, prices for the year arestill 2% lower than in 2011

FAST FACT:

£9,056

£8,764 £8,912

£8,000

£8,200

£8,400

£8,600

£8,800

£9,000

£9,200

Q4 2010 Q4 2011 Q4 2012

Average Asking Price in Q4

1.7% -3.2%

£9,056

£8,764 £8,912

£8,000

£8,200

£8,400

£8,600

£8,800

£9,000

£9,200

Q4 2010 Q4 2011 Q4 2012

Average Asking Price in Q4

1.7% -3.2%

£9,056

£8,764£8,912

Q4 2010 Q4 2011 Q4 2012

£9,200

£9,000

£8,800

£8,600

£8,400

£8,200

£8,000

5

s

LONG ROAD TO RECOvERyMARKET ShOwS SIGNS OF RECOvERy, bUT FUTURE LOOKS bLEAK FOR yOUNG DRIvERS

The economy will follow a ‘Loch Ness Monster’ recovery pattern featuring multiple dips. This will mean ongoing and increasing pressure on consumer spending power.Ian Pearson, Futurologist ”

“AvERAGE ASKING PRICE Q4

2012 was a turbulent year for the automotive industry. Following six months of decline, the market started to show small signs of recovery as the UK emerged from the double-dip recession reporting 1% GDP growth in Q3 2012. While GDP declined once more in Q4 2012, the automotive industry indicated signs of economic healing, reflected by Auto Trader’s Retail Price Index which provides insight into average used car prices. December 2012 marked the highest average price for used cars for the year (£8,982) and Q4 2012 showed a reassuring 2.3% quarter-on-quarter increase.

6

yOUNG DRIvERS AT RISK

• 55%of motoristsbelievetheycouldnotaffordtobeafirsttimedrivertoday

• Thisisespeciallytrueof women–just28%of thosewhohavebeendrivingforover fiveyearsthinktheycouldaffordtobeafirsttimemotoristtodaycomparedto59%of men

• Overhalf (53%)of 17-24yearoldsbelievetheworseningeconomicsituationand increasedfinancialpressureswillleadtoadecreaseinthenumberof youngpeople learningtodriveoverthenextdecade.Thisiscomparedtojustathird(33%)

of over65yearolds

• 71%thinkitwillbedifficultforyoungpeopletobuycarsintenyearstime

• 98%of consumersthinkthegovernmentisnotdoingenoughtosupportfutureroadusers

Although we have seen green shoots of economic recovery, 42% of motorists think we are not yet over the worst and that we will continue to feel the financial squeeze in 2013. Motorists believe this will impact most heavily on young drivers who face being priced off the road as a result of soaring motoring costs, including new insurance legislation, as well as a high rate of youth unemployment.

Other

They should be preparing the country for new types of engine and fuel

They should be lowering driving-related taxation

They should be investing more in infrastructure

They should re-write driving laws to reflect the situation facing 21st century motorists

They should be investing more in the British car industry

They are doing enough already

They should regulate fuel costs better

2%

5%

27%

31%

40%

46%

52%

78%

whAT ShOULD ThE GOvERNMENT bE DOING TO SUPPORT FUTURE ROAD USERS?

Young female drivers are set to lose out following the introduction in December 2012 of new European rules banning insurers from taking gender into account when calculating rates. Prior to the ruling, female motorists aged 17-25 paid on average £1,000 less than their male counterparts in annual car cover.1 According to the Association of British Insurers (ABI), the new ruling could result in a 25% increase in the annual cost of insurance for young female drivers.2 This could lead to one in four women (24%) being priced off the road as they struggle to keep up with rising costs according to research from uSwitch.com.3

The new unisex rate is likely to have a significant impact on the market as a whole. We could see an increase in the average cost of insurance as risk rises, as well as a reduction in the number of young female drivers on the road.

7

Learning to drive alone costs on average £1,1274 in the UK and first time motorists are being doubly hit by increases in the price of older vehicles. Traditionally young drivers buy cheaper and older cars and according to Auto Trader’s Retail Price Index the price of vehicles over ten years old has gone up 5%, so they now average £2,414, making it even harder for young drivers to get behind the wheel.

One in four female drivers could be priced off the road by new EU law

Inyearstocome,wearelikelytoseeroadtraintechnologythatletsonedrivercontrolalineof vehicles.Thiscouldbeusedtoallowsemi-autonomousconvoysof youngdriversunderthecontrolof amoreseniorleadertoreduceaccidentsand,hence,drivedownthecostof insurance.

Ian Pearson, Futurologist

“”

FEMALE MOTORISTS hIT hARDEST FOLLOwING NEw GENDER RULING

1 Gocompare.com, as of July 2012, the average difference on Gocompare quoted premiums in the 17-25 age bracket was £1,060 (£2,394 for men against £1,334 for women).2

Association of British Insurers (ABI), Research Paper No. 24, (2010).

3 USwitch.com, ‘New insurance could force one in four women off the road’, (November 14 2012). 4

Assuming learner passes both theory and practical test (priced £31 and £62 respectively) first time round and based on an average of 47 lessons priced at £24 each.

whAT ShOULD ThE GOvERNMENT bE DOING TO SUPPORT FUTURE ROAD USERS?

8

1. Consider buying a new car: Buying a new car might seem like a hefty investment but it could save you money in the long run. New cars are designed to give out fewer emissions, saving you money on your insurance and tax. Generally speaking, maintenance costs on new cars are considerably lower

and they also come on average with a minimum three year warranty.

2. Think about leasing a car: The majority of dealerships today offer a car leasing option, perfect for young drivers who may not have the upfront capital to buy a car outright. Leasing a car over a set period of time means you pay a flat monthly rate and many packages also include maintenance costs, so you know exactly how much the car will be setting you back when you sign the contract.

3. Petrol is just as economical as diesel...and cheaper: Don’t rule out petrol models if you are looking for an economical car. While costs may vary depending on engine size and mileage, modern petrol engines are becoming almost as economical as diesel cars and

will also help you save money at the pumps.

5. Don’t be scared to haggle: Do your research and shop about to make sure that the car’s price is in line with other cars of its kind to ensure you pay its true value. If you’re confident, you can haggle anywhere up to 10% off the original asking price. There could also be room for negotiation across finance and servicing costs of a car.

4. Be rewarded for good driving: Some car insurers are offering new technology ‘telematics’ which monitors how you drive and rewards safe motoring with cheaper premiums. The number of insurers offering this service is expected to become more widely available and is a great option for all responsible drivers.

TOP TIPS TO hELP yOUNG DRIvERS REDUCE COSTS

9

Graphic:Illustrateregionalwinnersandlosers(PriceIndexExceldocsheet3.Designideas:Mapof theUK/ranktheregions–podium/medals/thumbsupordownrewheremostexpensive)

Brits fear that by 2023 motoring costs in the UK could account for over £135bn including fuel prices, insurance and driving related taxation.

COST OF MOTORING SET TO SOAR MOTORISTS FEAR COSTS COULD DOUbLE OvER NExT TEN yEARS

AvERAGE ASKING PRICE OF A USED CAR IN Q4 2012

EastMidlands£8,680

Northern Ireland

£9,963

NorthEast

£8,387

North West

£8,390

Scotland£9,936

£9,490

WestMidlands

London

Yorkshire

Wales£8,143

SouthWest

£7,968

SouthEast

£9,121

£9,392

EastAnglia

£8,700

£8,408

Yorkshire

Our research revealed that the average car owner currently spends £2,290 on motoring costs each year and some hard-hit Brits fear this amount could double to £4,580 in the next ten years.

This is reflected by the Auto Trader Retail Price Index which reveals that the average price of a used car has also increased across all regions in the UK.

ALTERNATIvE FUEL vEhICLES GAINING FAvOUR wITh MOTORISTS, bUT MARKET ShARE STILL LOw

ElectricPetrol

Petrol cars see an increase

in price this quarter of 3% to £7,034. Q2 2012 saw the

lowest priced petrol cars in the last three years but the second

half of 2012 saw prices pick up again.

Alternatively fuelled vehicles saw

quarter-on-quarter decreases of 6% and year-on-year

decreases of 2% as the average price drops £1,066

from Q3 to Q4.

10

CommentaryWhile the electric car revolution may be taking longer to get into gear than initially anticipated, manufacturers are still investing heavily in alternatively fuelled vehicles and, if prices continue to fall, we could see a growth in market penetration.

5

GfK, Automotive Sustainable Mobility Report, (2012).

The number of alternatively fuelled vehicles for sale through Auto Trader has almost doubled over the last three years, and this looks set to grow as motorists look for ways to dodge rising fuel costs. The Auto Trader Retail Price Index reveals a significant quarter-on-quarter decrease of 6% (£1,066) in Q4 2012 in the average price of alternatively fuelled cars as they start to hit the mainstream. However, this still remains a very small percentage of cars advertised on Auto Trader, a trend which has been seen across the industry as a whole. Research from GfK has revealed the main inhibitors to people buying an electric vehicle are the high purchase price - compared to a conventional car - and practical issues relating to the range of the batteries between charging, the length of time that recharging takes, and the availability of charging points.5

MOTORISTS FORCED TO ADAPT TO RISING COSTS CONSUMERS LOOK TO OFFSET PRICE INCREASES by ChANGING ThEIR MOTORING bEhAvIOURConsumers acknowledge they will have to change their current driving patterns if they are to keep up with the relentless increases to the cost of motoring.

11

Cut down spending in other

non-motoring areas

Buy more cost e�ective

cars

Cut down on the number

of cars in my family

49% 41% 23% 18% 13% 4%

How will consumers change their motoring

behaviour?

I will not change

my spending habits to

compensate for higher

motoring costs

Drive fewer miles or

drive less frequently

Take on debt to pay

for rising motoring

costs

CommentaryThis year 22% of motorists who bought a car chose their vehicle specifically to help reduce running costs. This number is set to increase as consumers become more savvy when it comes to getting the most bang for their buck. We’ve seen a surge in sales of low emission cars, such as the two cylinder fiat 500 which comes with £0 annual road tax. It’s almost impossible to find one now as they have become so popular!

12

‘ROAD TRIbES’ OF ThE FUTURE

Consumers have become accustomed to high-tech gadgets and devices across all areas of 21st century life, and motoring is no exception to this trend. Motorists anticipate drastic changes to the present state of driving making it safer, easier and more sustainable.

FUTURE OF MOTORING

ThE NExT GENERATION OF CARS

“

”

Asmotoristscontinuetofeeltheeconomicsqueeze,almostoneinfiveof thosesurveyedwouldconsidermoneysavingtacticssuchascarpooling-that’streblethecurrentamount!Asmotoristsareforcedtoadapttheircurrentdrivingbehaviourwearelikelytoseetheemergenceof newsocialnetworkstofacilitatealternatives,suchascarpooling,withsetregulations.Thiswillallowsharingof costsandenhancesecuritysothatstrangerscansharesafely.Socialnetworkswouldworktomatchjourneystopassengersandwecouldsee‘roadtribes’emerging,suchasschoolrunmumsorcommuters.Ian Pearson, Futurologist

13

ThE CARS OF 2023

Althoughonly7%of womensurveyedforthisreportsaidtheywouldbewillingtopaymoreforextragadgetssuchasaugmentedrealitydashboardscomparedto18%of men,wearelikelytoseeashiftinperceptionassuchtechnologybecomesmorecommonplace.Womenwillwantmoreaugmentedrealitythanmenwhenitisusedtoaugmentviewwithfamiliarlandmarks.Womentraditionallynavigatemorebylandmarksthanmenandaresuretobenefitfromsocial,touristandretailinformationthatsuchtechnologywouldprovide.Ian Pearson, Futurologist

“”

Technology letting you

know where there are parking spaces

Self-driving cars

Voice command/recognition to control the car

Turning your windows

into touch screens

Augmented reality

dashboards

Airbags that help stop cars

Energy storing panels

Cars that communicate

with each other

Electric cars

84%

42%

76% 62% 76% 78% 80% 62%

88%

TEChNOLOGy MOTORISTS ExPECT TO SEE IN NExT TEN yEARS

MEn1 Electricpoweredcars2 Energystoringpanels3 Airbagsthathelpprotect

thecar’sexterior4 Technologythatindicates

wherethereareparkingspaces

5 Self-drivingtechnology

WOMEn

1 Airbagsthathelpprotectthecar’sexterior

2 Electricpoweredcars3 Energystoringpanels4 Technologythatindicates

wherethereareparkingspaces

5 Self-drivingtechnology

TOP FIvE INNOvATIONS

MOTORISTS wOULD bE wILLING TO

PAy FOR

Already we’re seeing great technological improvements when it comes to tailoring everything from insurance rates to interior design around the individual. ‘One size fits all’ policies and cars will become a thing of the past as consumers demand a more personalised experience. In the years to come, a couple could have their own décor in the same shared vehicle thanks to improvements in fabric material which can be self cleaning, emit light, change colour and even give off scents under electronic control!

Glass, PC and particularly Games manufacturers have taken interest in virtual developments in the car industry. Cars could soon boast touch-screen windows, 3D technology and allow for all elements of the car to be manipulated to make for a more engaging environment.Ian Pearson, Futurologist

A new and revolutionary innovation is fast approaching: the driverless car. While only 17% of motorists surveyed for this report said this is something they would be willing to pay for, this new technology is set to bring about profound changes to the future of driving. The new technology, currentlybeing trialled by multiple companies,

CARS DESIGNED AROUND yOU

LOOK, NO hANDS!“The car could

become a totally digitally immersive

environment!”

“

”

Autonomous cars are expected to bring many major benefits including: - A major reduction in accidents due to sensor technology that predicts and avoids collisions

- Creating up to five times more space for vehicles on the roads by cars driving nose to tail

- Freeing up parking spaces in congested areas by dropping you off and coming back to pick you up when you are ready

14

including Google, is expected to be a common feature on our roads in as little as ten years time.

“ ”Self-driving cars will be far more attractive to young drivers due to reduced accidents and, hence, insurance. This is likely to accelerate market penetration. Autonomous technology will eventually be a basis of public transport as well as corporate and private travel, which will bring down costs.Ian Pearson, Futurologist

Electronic control of cars could gradually become mandatory to reduce accidents and force compliance with speed limits and other road laws. As cars do all the hard work for us, motorists will experience reduced freedom of driving style. However, with all the technological advancements and trials currently underway, our passion for the open road is sure to be reignited as we make way for a new era of motoring.

CARS wON’T bE FLyING ANyTIME SOON!

Although the sci-fi vision in ‘The Fifth Element’ is fun, we aren’t likely to see flying cars

any time soon!

“”

ThE FINAL wORD

Although flying cars do exist in prototype, it is very doubtful that we will see many flying cars in the next few decades. Realistically, they are only likely to become about as common as helicopters are today. In order to make them safe, flying cars would have to be completely autonomous and would need far better computers and communication networks than we currently have. They will also be incredibly expensive! Ian Pearson, Futurologist

15

Kob

al

For all media enquiries, please contact the Auto Trader Press Office at Citizen Relations:

T: 020 3451 9400E: autotrader@citizenrelations.com

AbOUT AUTO TRADERAuto Trader is the UK’s number one motoring digital marketplace with over 11 million monthly unique users, carrying out over 135 million searches on more than 350,000 new and used vehicles. Over three million people access Auto Trader via their mobile devices every month, through the mobile-optimised site and apps developed for iPhone, iPad, Android and Nokia. Auto Trader is part of Trader Media Group. For more information, visit www.autotrader.co.uk.

Trader Media Group is Europe’s largest specialist multi-media group and supplier of leading automotive marketing products and services. The Group also offers a range of other specialist online publications including vans.autotrader.co.uk, trucks.autotrader.co.uk, plant.autotrader.co.uk, farm.autotrader.co.uk, autotrader.co.uk/bikes, caravans.autotrader.co.uk and motorhomes.autotrader.co.uk. Trader Media Group operates in the UK, Ireland and South Africa and is jointly owned by Guardian Media Group and Apax Partners. For more information, visit www.tradermediagroup.com.

Ian Pearson is a leading Futurologist, identifying and explaining the key changes ahead in every sector of business and society that will arise as a result of rapidly changing technology.

Ian graduated in Applied Mathematics and Theoretical Physics from Queens University, Belfast. He has worked in most branches of engineering and as a futurologist in the telecoms sector before setting up Futurizon, providing consultancy and strategy on future technology.

CONsuMER REsEARCh:

In collaboration with eDigital Research, Auto Trader surveyed 3,495 motorists* in December 2012 on the followingindustry-related topics:

- The general economy- Vehicle running and ownership costs - Personal finances and the future of motoring for young drivers- Predictions about technological developments in motoring

*Motorists are defined in this instance as driving licence holders aged 17 years or more, and respondents were recruited via the Auto Trader consumer panel, eDigital Research panel, and social media.

AuTO TRAdER RETAIL PRICE INdEx REsEARCh METhOdOLOgY:

Base Data and how average prices are calculated: The Auto Trader Retail Price Index monitors the movement of advertised asking prices based on used vehicles advertised on autotrader.co.uk since January 2010. As this represents over 80% of all available used cars for sale in the UK, Auto Trader is in a unique position to comment on variations in advertised prices.

With more than 15,000 dealers – an estimated 85% of all car dealers in the UK – advertising their vehicles on the Auto Trader website and the ability to sample up to 400,000 individual used cars each month, the impact of natural fluctuations in the profile of the used cars (due to variations in age, mileage, condition) is minimised.

Data Cleansing for Auto Trader Retail Price Index: Using a variety of business and proprietary rules, raw advert data is cleansed to ensure an accurate reflection of prices and to remove any anomalies such as entries that lack sufficient information or duplicates.

RESEARCh METhODOLOGy

AbOUT IAN PEARSON