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Rising demand for second-hand cars bodes well for S&U, says City broker

Unlike new car sales, sales of used cars have “grown consistently” since 2009, and are projected to continue rising until at least 2023
new car
Advantage focuses on the non-prime used car market

The rising demand for used cars should help to drive growth at S & U PLC (LON:SUS) for a good few years yet, according to analysts at Peel Hunt.

Through its Advantage Finance subsidiary, S&U provides motor finance to people with a slightly chequered credit history who are looking to buy a second-hand car.

WATCH: S&U 'firmly footed' after increase in profits and steady growth

The drop-off in new car sales has been widely reported in recent years, but the used car market is going from strength to strength, which bodes well for Advantage.

According to the Finance & Leasing Association (FLA), used car sales have “grown consistently” since 2009, and are projected to continue rising until at least 2023.

“Whilst we recognise there is a degree of economic uncertainty, S&U is taking a cautious approach to growth as evidenced by tighter motor finance underwriting,” said Peel Hunt in a note to clients.

“In the long term the market is expected to remain buoyant and lenders (such as Advantage) with a focus on ensuring best risk practice should remain well positioned.”

Peel Hunt, which is S&U’s house broker, has the stock as a ‘buy’ with a target price of 2,300p.

Towards the close of play on Thursday, S&U shares were down 0.5% to 2,160p.

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S & U PLC Timeline

May 23 2019

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