Self-registrations and you
A casual look at the new car market appears to show a sector in rude health, having been through the ravages of the recession and now in growth mode. Indeed, year-on-year sales growth has been evident for some months now with the market widely tipped to top the two million mark this year. Surely these are encouraging signs for a fragile economy battling against strong head winds to get back on track.
Each month the Society of Motor Manufacturers and Traders produces a set of new car registration figures, and these form the benchmark when it comes to judging the health and wellbeing of the new car sector. However, there's an important distinction between a registration and a sale; while every sale is a registration, not all registrations are a sale.
Manufacturers and dealers have long engaged in self-registering, or pre-registering cars. What tends to happen is a manufacturer with a surplus will offer cars at a discounted rate to its dealers, they buy them to hit their new car bonus targets, run them as demonstrators or rental cars and then sell them as nearly-new vehicles.
While this scenario can benefit dealers and customers when the economy is strong, it can distress it when the market is weak and that is what is happening now. Indeed, some carmakers, faced with plummeting European sales, are diverting cars to the UK rather than cut production, which would result in job cuts and loss of market share.
Unfortunately for fleets this is not an issue restricted to the retail sector. CAP, the car valuation specialist, recently warned that as many as 30% of new cars are self-registered and the trend will impact residual values.
‘Pre-registrations are certainly increasing this year. Research by CAP has consistently revealed that a very significant proportion of new car sales reported by the SMMT would qualify for the term self-registered,’ said Philip Nothard, CAP's retail and consumer valuation editor.
‘Clearly if a dealer is able to offer a new car at up to 30% discount, then the value of the nearly-new car will inevitably have to slip to maintain its appeal. This then cascades down through the age bands. This is obviously an issue for those, such as large fleets, who are exposed to used car risk,’ he said.
Peter Davenport, chief executive of Staffordshire fleet solutions business, Motiva Group, believes the practice is already having knock-on effects for fleet managers.
‘There’s very little stability in pricing, which makes things difficult from the fleet manager’s point of view. If the headline cost of a vehicle can go up or down by 30% from one day to the next, longer-term budgeting and investment decisions become harder.’
There's also the potential for creating an unwanted human resources issue. To illustrate the problem, Davenport says a middle manager joining a company a few months ago may have been given the option of having a mid-range brand; while someone joining the day after a one-off self-registration deal may be able to have a premium German brand. The net result? One incredibly disgruntled employee.
‘This scenario will in turn create perceptions of employee value that human resources and fleet managers will have to be aware of,’ he says.
Clearly the high volumes of self-registrations are impacting the fleet sector. Whether the effects are positive or negative are dependent on how you finance your cars and who takes the RV hit. Certainly outright purchased cars, due to be de-fleeted in three years' time, are looking vulnerable.