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Little change expected in used-car market during August
Many franchise dealers are being forced to re-think their used car strategy in order to keep the forecourt full. Non-franchise cars, which a dealer group would have earmarked for auction only a few months ago, now make great retail stock.
Life isn’t getting any easier for traders. Auctions are attracting more and more private and overseas buyers who are pushing bids way over the true market value of some prime retail cars. Dealers are still buying direct from the manufacturer to safely feed used demand and even switch sell some customers from new cars. This is especially true in situations where long lead times remain on vehicles such as Audi A5 Coupe, where buyers now have to wait until next year for a factory build slot.
Many franchise dealers are being forced to re-think their used car strategy in order to keep the forecourt full. Non-franchise cars, which a dealer group would have earmarked for auction only a few months ago, now make great retail stock. The cars don’t need preparing to the tip-top standards of a manufacturer-backed used car scheme, but still offer the customer a complete ‘peace of mind’ when buying from these trusted dealerships. A £7995, 60000-mile VW Golf for sale next to a 12 month old C63 AMG works wonders for building customer confidence. Dealers retaining and retailing these auction candidates are further bolstering the stock shortage if you’re a non-franchise trader.
Some manufacturers are under pressure to move new stock in the current flat retail season. This pressure is made worse because of model year changes and the need to clear some of these before the registration change in September. Registering new vehicles in the short term however can prove to be a big headache if it is not managed properly. Serious residual value and brand damage can occur when the market is flooded by poor specification and ill-thought out colour choice derivatives. However, if managed properly, this provides a much needed profit lifeline for used car dealers. With no light at the end of the dark economy tunnel it certainly does not look like fleet or retail buyers will suddenly start showing any significant increase in buying new cars. The fleet industry continues to show signs of extending contracts to ‘hang on to’ vehicles for longer, further exacerbating the used car supply chain.
The perceived value brands and some of the volume manufacturers of new cars are about to encounter somewhat of a shock. The introduction of Dacia into the UK with its very keen new pricing strategy is surely going to put the proverbial cat amongst the pigeons. This is not just going to affect the new car buyer, but for the traditional used buyer too. Residual value percentages could be the highest in the market compared to cost new. This could also affect used values for other brands when comparisons take place of similar models. However this could all pale into insignificance not if, but when, the Chinese brands come to these shores and offer the average person just what he or she is looking for, and at the right price. This will turn the new and used markets literally on their heads, watch this space.
For August values have undergone a seasonal drop of around 2%. However this does not affect the usual star performers such as Q3 and Evoque where demand far outweighs supply. Buyers of these models remain insulated from the current depressed economy.
Gavin Amos, VIPdata
02 Aug 2012 09:30