Car dealer business confidence plunges

Motor Trader Barometer highlights grave retailer concerns

The economic downturn has decimated confidence in the motor retail sector in the last three months.

More than three-quarters of dealers are less confident about their prospects than in March this year, according to the Motor Trader Franchised Dealer Barometer, with just 6 per cent expecting better times ahead.

With the Bank of England determined to keep the lid on inflation by resolutely refusing to stimulate consumer spending with interest rate cuts, despite the protestations of the RMIF, there is little chance of an upturn in the months ahead.

“Reductions in interest rates, efforts to stabilise fuel costs and clarification over the cost of motoring are all within the government’s remit and we urge it to look into these areas urgently,” said Sue Robinson, director of the RMIF’s National Franchised Dealers Association.

Fifty-nine per cent of dealers reported they failed to hit their new car sales tagets in the second quarter of the year.

“Not a single respondent expects more full year sales than they forecast in March,” said Barometer author and Trend Tracker analyst, Toby Procter.

He added that the average decline for the 65 per cent of dealers who expected lower annual new and used sales worked out at 16 per cent.

Procter warned that if respondents’ overall forecasts proved correct, the new car market for 2008 could drop 10 per cent behind first quarter expectations – an acceleration of the 6 per cent decline in June.

“This slowdown is not unexpected but signals an increasingly tough retail environment,” said Paul Everitt, SMMT chief executive.

Keith Parry, head of motor trade, Barclays Commercial Bank, said: “Consumers are putting off the purchase of a new car as disposable incomes come under pressure.”

Buyers that are venturing into showrooms are increasingly switching to smaller, cheaper, more economical models, which further hits dealers’ profit margins.

Almost nine out of 10 Motor Trader Barometer respondents said their customers had downsized to save on purchase price and fuel costs.

“Those that are buying are showing an increased interest in small cars that are diesel fuelled as consumers focus on fuel efficiency and value for money,” said Parry.

The quarterly Barometer, sponsored by RAC Warranty, offered dealers little hope of compensating for lost sales revenue through boosting point-of-sale finance.

Although respondents noted a marginal rise in customers requesting point-of-sale finance, this was negated by 62 per cent of dealers reporting the credit crunch had made it harder for them to secure approval from their own finance suppliers.

MotorTrader