More than a third of UK retailers have seen profit margins on used cars fall over the past 12 months.

The findings, from a national CAP survey, uncover an odd paradox – while retail used car sales are healthy, buoyed by strong customer demand, trade values have been falling.

CAP believes dealers need to take advantage of high supply levels to drive down trade prices and grow retail margins.

CAP’s survey results reveal that 37% of dealers have seen a reduction in profit per used car unit, achieving financial growth by increasing volume sales.

A further 36.5% report unchanged margins while just 26.4% say margins per unit have increased. Dealers in some regions have, however, fared better than others with those in the West Midlands, for example, consistently reporting higher margins. Here the figures for ‘up’, ‘unchanged’ or ‘down’ were 35%, 45% and 20% respectively.

In Scotland, 41% reported higher margins, while 35.2% saw them falling.

Dealers in the East Midlands reported the best all round results with 40% growing margins and 20% seeing them fall.

CAP’s Mike Hind says: “Price competition appears to be particularly strong in London, the South East and the South West. In these regions, more than half of those dealers questioned reported reduced margins.”