Automotive insights

Automotive industry aims to tackle rise in 'clocking'

Owen Edwards Owen Edwards

More stringent checks are needed to spot the practice of altering a vehicle's odometer, also known as clocking. Research shows this is on the rise, with clocked vehicles increasingly found in the UK and European markets.

Costly and potentially dangerous, retailers and governing bodies are looking at how to tackle the issue. Detection is not an overly easy task, but improvements in mileage record-keeping and the widespread use of telematics should help to combat this growing trend. Last year saw 2.5 million vehicles registered in the UK1. Impressively, 8 million used vehicles were sold in 2017, continuing a streak of robust growth over the last five years2. Despite signs of weakness over recent months the used car market in the UK is still riding high3.

One of the unfortunate side effects of a healthy used car market and the rise of vehicles being purchased using personal contract purchase (PCP) and personal contract hire (PCH), is that more vehicles are having their odometer adjusted. As a consequence, there is a risk to the automotive downstream industry as a whole, from motor vehicle financing companies through to general public. The impact of clocking could result in lost income, excess mileage payments, unsubstantiated vehicle residual values and health and safety issues.

Adjusting a vehicle's odometer is not illegal, although it is against the law to sell the vehicle on without telling the new owner what has been done. In fact, it can be both quick and cheap to have an odometer altered, with many online businesses advertising the service for up to £100.

Raising awareness of clocking in the UK and Europe

A number of industry bodies in the UK are taking steps to raise public and government awareness about clocking. These organisations include the Vehicle Remarketing Association, the National Franchise Dealers Association, and Cap hpi, to name but a few. Together they have undertaken research into the issue with the aim of making it illegal to alter an odometer.

The EU is also concerned about the practice and its use throughout member countries. The EU Directorate-General for Internal Policies for Transport and Tourism department even commissioned research in November 2017 to review the issue.

The Directorate was right to be concerned as the study provided some alarming results:

  • In Germany, 33% of odometers in the total used car market were manipulated
  • The Czech Republic saw 37% of its odometer readings manipulated
  • Tampering in Italy hit 50%, according to data provided by the Automobile Club of Italy
  • 18% of cars imported from the UK to Ireland display a false mileage
  • The UK Government’s economic regulator estimates that 5-12.5% of cars had a mileage discrepancy in 2010. However, the EU commission has indicated “These statistics…seem to be quite optimistic in the opinion of the majority of experts interviewed for the purpose of this research”
  • The European Parliament Committee on Transport and Tourism concluded that “odometer tampering is still a widespread malpractice in the European Union and affects almost all second-hand car markets of its members States”4.

How widespread is clocking in the UK?

According to Cap hpi's 2016 research, 1 in 16 vehicles in the UK market that are up to 15 years old have been the subject of clocking5. However, we believe that the number of vehicles clocked is likely to be higher in younger vehicles as a lack of residual value would suggest that older vehicles are less likely to be clocked. A similar survey carried out by Cap hpi in 2014 showed that 1 in 20 vehicles had their odometers adjusted, which means there has been an alarming 25% increase in the number of clocked vehicles between 2014 and 20166.

In terms of units, it is estimated that 2.3 million vehicles on the roads today are not showing accurate information. This has proved distressing for dealers and insurers, with a 2015 Cap hpi survey showing that 70% of dealers worried that clocked vehicles could harm their reputation. In fact, 40% of dealers had already previously part-exchanged a vehicle only to later discover that it had been clocked - a situation that affects the credibility of the automotive industry and the safety and financial welfare of consumers7.

Why does clocking matter if it's not illegal?

While it is true that clocking is not illegal, it does lead to unwitting customers and vehicle finance companies losing out. According to Cap hpi, a 2012 vehicle that has had its odometer adjusted from 90,000 to 30,000 miles could be sold for £2,000-£4,000 more than its true retail value (see table 1).

Companies that supply vehicle finance are also at risk of losing out financially due to clocking because many PCP or leasing contracts include pre-agreed mileage limits. As consumer excessive mileage costs can be up to 20 pence per mile, a 5,000-mile reduction of the odometer could end up costing a financing company £1,000. If a business has a large number of vehicles financed, this could have a significant impact on company profits.

It's a real concern to the industry, especially as 82% of new, private vehicles were purchased through PCP financing in 2015. If a financing company provides PCP finance for 10,000 vehicles and has 5% of these vehicles clocked by 5,000 miles, they would see a drop in profits of £500,000. There is a worry that those purchasing clocked vehicles may be uninsured, the vehicle warranty could be void or they could lead to a fatality if the vehicle has not been serviced correctly.

The importance of awareness

Clocking is becoming an increasingly large concern for those in the automotive industry. An online poll undertaken by The Daily Telegraph in 2015 showed that 25% of respondents would consider altering their vehicle's odometer, with 18% saying that they would definitely clock their car8

This attitude tallies with the rise that we have seen in odometer adjustment. Despite the EU's assurance that it is working on preventative measures, it's clear that more needs to be done. A key area to address going forward will be to make consumers, dealerships and vehicle financing companies more aware that there is a real issue in the UK. Not only do they need to know what clocking is and how much it is happening, but also how it could affect them.

References

  1. UK new car market declines in 2017 but demand still third highest in 10 years’, SMMT, 2018
  2. 'PennyHill Investor Briefing & Strategy Update’,Pendragon PLC, 2017
  3. ‘UK car dealers feel chill of falling sales’, Financial Times, 2017 
  4. ‘Directorate-General for Internal Policies, Policy Department B, Structural and Cohesion Policies’, European Parliament, 2017 
  5. Tesla’s electric semi truck: Elon Musk unveils his new freight vehicle, Vox, 17 November 2017
  6. ‘Clocking, a growing concern.’, hpi.co.uk, 2015
  7. ‘Are car dealers the new victims of clocking?’, Car hpi, 2018
  8. ‘Are car dealers the new victims of clocking?’, Car hpi, 2018