How the cost-of-living crisis is affecting the UK motor trade

The UK continues to face the pressures of a cost-of-living crisis, with inflation, higher energy bills, and rising interest rates reshaping the way households and businesses manage their money. For the motor trade, these challenges are particularly significant. Dealers, mechanics, and other motor trade professionals are experiencing increased expenses, reduced consumer demand, and tighter margins.

Understanding how the cost-of-living crisis is affecting motor traders is essential for businesses looking to adapt. The ability to plan ahead and put protective measures in place will determine which enterprises not only survive the downturn but come out stronger.

Impact on business costs

One of the most pressing issues for the motor trade during this economic downturn is the sharp rise in operational outgoings. These include:

• Rising operational costs: Businesses face higher energy bills to run workshops, increased transportation prices, and greater expenditure on staffing. These pressures eat directly into profitability.
• Increased prices for parts and equipment: Inflation and supply chain disruptions have driven up the price of vehicle parts, diagnostic tools, and workshop equipment. Repair work now costs more to complete, yet customers are less able to afford price increases.
• Higher insurance premiums: Motor traders have also been hit by steep rises in insurance premiums. According to recent data, motor insurance costs have increased by around 50 per cent year-on-year, largely due to inflation in repair amounts and supply shortages (Reuters).

These combined pressures mean that running a motor trade business is now more expensive than at any point in recent years.

Challenges for motor traders

With prices and expenditure rising, traders are also contending with reduced demand from customers.

• Reduced consumer spending: Research shows that around 70 per cent of motorists have altered their car-buying behaviour due to financial pressures (Autoserve Club). Many are delaying purchases, choosing smaller vehicles, or holding onto existing cars for longer.
• Difficulty in maintaining profitability: As buyers spend less and servicing work is delayed, garages and dealers see smaller margins. The Motor Ombudsman found that 56 per cent of drivers planned to delay servicing to save money, while 40 per cent worried they couldn’t afford their next MOT (The Motor Ombudsman).
• Pressure to offer competitive pricing: To attract and retain customers, traders often feel forced to lower prices or add discounts. While this can help bring in business, it further squeezes already-tight profit margins.

These UK motor trade issues in 2025 highlight the difficult balancing act – keeping services affordable for customers while covering rising operational costs.

Strategies to mitigate impact

Although the current climate is tough, there are steps motor traders can take to remain resilient during the downturn.

• Optimise business operations: Streamlining workflows, investing in digital booking systems, and improving efficiency in the workshop can reduce wasted time and labour costs.
• Negotiate better deals with suppliers: Building strong relationships with suppliers and shopping around for competitive rates on parts and equipment can help offset inflation. Bulk purchasing agreements may also secure better pricing.
• Explore money-saving measures: Energy efficiency upgrades, preventative maintenance on workshop equipment, and careful financial planning can all lower running costs. In addition, traders should review insurance policies to ensure they are not over-paying while still maintaining adequate protection.

By taking proactive steps, businesses can cushion the impact of the crisis and position themselves to remain competitive.

Final thoughts

The economic impact on motor traders in 2025 cannot be underestimated. Rising prices, reduced consumer demand, and higher insurance premiums are creating some of the toughest trading conditions in years. Yet, businesses that adapt quickly, streamline operations, and protect themselves with the right cover will be best placed to survive.

Staying informed and proactive is key. The cost-of-living crisis presents real challenges, but it also highlights the importance of resilience and smart planning.

Facing challenges due to the cost-of-living crisis? Get expert advice on motor traders insurance with Road Runner today.

Explore our Motor Trade Insurance options

References

1. Autoserve Club – Cost of Living Crisis Affects 70% of Car Purchases
   https://autoserveclub.co.uk/blog/cost-of-living-crisis-affects-70-of-car-purchases/
2. Close Brothers Motor Finance – Impact of the Cost-of-Living Crisis on Car Buying
   https://www.closemotorfinance.co.uk/cost-of-living-crisis-impacting-car-buying
3. The Motor Ombudsman – Impact of the Cost-of-Living Crisis on Automotive Sector Disputes (2023)
   https://www.themotorombudsman.org/wp-content/uploads/2023/03/The-impact-of-the-cost-of-living-crisis-on-disputes-in-the-automotive-sector.pdf
4. Office for National Statistics (ONS) – Consumer Price Inflation, UK: December 2024
   https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/december2024
5. Reuters – UK Insurers Under Pressure Over Spike in Car Insurance Premiums (April 2024)
   https://www.reuters.com/world/uk/britains-insurers-under-pressure-over-spike-car-insurance-premiums-2024-04-17/
6. Gallagher (AJG) – Cost-of-Living Crisis Top Risk for UK Businesses
   https://www.ajg.com/uk/news-and-insights/cost-of-living-crisis-top-risk-for-uk-businesses/
7. The Guardian – UK Economic Growth Confirmed at 0.7% in Q1, Household Incomes Fall (June 2025)
   https://www.theguardian.com/business/live/2025/jun/30/uk-economic-growth-confirmed-07-first-quarter-household-saving-ratio-falls-mortgage-approvals-trade-deal-tariffs-business-live
8. CarFinance247 – What Will the Cost-of-Living Crisis Mean for Car Buyers in 2025?
   https://www.carfinance247.co.uk/blog-post/what-will-the-cost-of-living-crisis-mean-for-car-buyers-in-20251. Autoserve Club – Cost of Living Crisis Affects 70% of Car Purchases
   https://autoserveclub.co.uk/blog/cost-of-living-crisis-affects-70-of-car-purchases/