The Insider: Light at the end of the tunnel?
As manufacturers offer ever-easier access to cars, and taxation drives end-users towards cash allowances, The Insider asks; are dealers missing a trick?
Car dealers have it tough; reduced margins, longer servicing intervals, higher investment in customer service and more reliable cars. Not exactly a mouth-watering business model. Yet there remains positive talk about the valuable future for car retailing.
If you’ve read my recent Insider articles, you may have noticed that I like cars. So, let’s contrast two similar scenarios illustrating the changing role of the dealer.
Back in the mid-Eighties, my father got a new job including a company car allowance. Back then, this was an up-front cash advance so, armed with (if I recall correctly) a budget of £14,000, my father started to research his car choice. Which basically meant visiting most of the dealers in our mid-size town to collect brochures and price lists.
After narrowing things down with the help of What Car? magazine and an enthusiastic son, we visited a couple of dealers to test drive our shortlist. Neither dealer had a turbo diesel demonstrator and the test drive only lasted about 20 minutes, so I’m not entirely sure of the value provided even back then.
Nevertheless, after narrowing the choice down to a Peugeot 405 SRdT, my father played off two local dealers against each other, necessitating numerous visits to the sales teams until the deal was done.
After the glamour of new car handover day some three months later, the dealer relationship was one of regular servicing, which in fairness they did very well. Sufficient enough that, when my mother’s ancient Mini Clubman finally gave up the ghost, she purchased a 205 from the same dealer with no chasing around. A pretty good example of how valuable a local dealer could be.
Contrast this tale with the recent experience of a good friend of mine who chose a new job encompassing a car allowance.
Like my father, he drew up a shortlist of cars, this time based on his internet search activity rather than anything printed. He then calculated how much his monthly allowance was and engaged with a number of online leasing brokers offering personal contract hire packages. I shouldn’t be surprised, but the choice of cars at a relatively modest monthly amount was enormous, including a vast selection from premium manufacturers. At no time did my father consider a premium car – that’s today’s usership model generating excellent value for you.
As a family man, but still a car enthusiast, my friend needed reasonable passenger and boot space and he was pretty pleased with turning up a cracking two-year deal for a Golf GTD estate. He was even more pleased when he discovered a different broker offering a 320d Touring for a similar rental. But absolutely gobsmacked to see an alternative broker with an E-Class estate at a lower monthly cost than either.
Further internet surfing revealed a test drive programme from Mercedes-Benz UK, and a similar car was duly delivered to his home a week later for a 48-hour assessment. Impressed, my chum did the deal online with the leasing broker and, within two weeks, a new E-Class was delivered to his driveway.
The process took less than a month and at no point did he engage with a dealer. Nor did he want to. And why do so when he’s given a five-out-of-five review for all aspects of his transaction? And you can imagine the discount given by the supplying dealer. On the upside for his local dealer, he’ll take it there for servicing.
And maybe, in two years’ time, when there’s a greater choice of battery electric cars that require less significant servicing, my chum won’t be visiting a dealer at all during his next two year lease deal. For dealers, perhaps the light at the end of the tunnel is the oncoming train….