Missed targets and massive discounts

It’s nearly mid-September and you can be sure that most manufacturers are under pressure from the factories to achieve pre-agreed new car sales targets. The only problem is that this year most dealers are probably not going to manage even 70% of those targets.

So what happens now?
Do the factories review those targets?
Do manufacturers offer assistance to ease the burden?
In fact, probably a mix of the two, but how will this affect the consumer?

Well for a start, in my experience, seeing as all car manufacturers are ravenous for increasing their market share and brand awareness, they will stop at almost nothing to ensure that their ‘partners’ (i.e. franchises) bring in those expectations. Wherever your dealer happens to reside in the world those targets will have to be reached, this usually means the following;

Massive discounts to dealers for pre-registering new cars as all cars, when registered from new, count towards overall brand numbers. This is despite the rules having been tightened up with regard to pre-registration.

A few years ago, the industry was being flooded with pre-registered cars and these were skewing the government’s figures and distorting the market. So in 2000 legislation was introduced by the OFT (Office of Fair Trading) to reduce the number of pre-registered cars coming on to the market. The legislation stated that cars should be retained by the dealer for a minimum of three months before being sold. In another attempt to get around the regulations certain unscrupulous dealerships have been known to hold on to the vehicle’s registration after it has been sold in order to comply with the “three-month rule” (basically they do not fill in the V5C document until the three months have elapsed). However keeping hold of the V5C is illegal and dealers can face a fine of up to £1,000 for doing so but the practice is, unfortunately, quite widespread.

However, some of the larger dealer groups have other (sometimes non-motor trade related) companies in their portfolios who they register these cars to and can then, therefore sell them immediately, effectively flouting the rules by being able to sell the car with delivery mileage and just one owner on the registration document and gaining all the discount from their manufacturer. For a customer this can be great news as the dealer will often pass on most of the saving in order to achieve his September sales target meaning a new car can be bought with thousands of pounds off, however the downside of this is these vehicles tend to be less desirable or run-out models which are being replaced.

So from a customer’s point of view there are huge savings to be had buying pre-registered cars but there are downsides. Firstly, the dealership is recorded as the first registered keeper of the vehicle (meaning that when the car is sold on it has had two owners instead of one). Secondly, the manufacturer’s warranty starts from the date of first registration, so that particular clock has already been ticking a while when the car is sold. So any savings gained at the beginning turn out to be losses at the end in that the car’s residual value is less than it would have been had it not been pre-registered. As with most things in life these things tend to even themselves out over time.
Our advice would be to ask the dealer you are intending to buy from whether there will be any delay in sending the V5C to the DVLA (Driver and Vehicle Licensing Authority). If they say that there is likely to be a delay of a few months before you receive the V5C registration document then it’s probably best to walk away from any deal. The implications of driving around for a few months, in a vehicle that is not registered to you, can range from the serious (police, insurance problems) to the inconvenient (council parking permits, etc.).

So the bottom-line is, if you are planning to buy a new 58 plate registered car, decide what you would like to buy, attend the showroom quite late in the month (but not too late to not take the car by the end of the month) as if a dealer is short of his target (and this year he almost certainly will be) then you will be incentivized further to complete by month end.
If you want a more desirable car in the range then the deal may not be so great, but if a deal is what you want and the car is secondary this is the time to get it, and make sure you check the press and internet sites for the new car you want, you may be able to afford that badge after all!