Most of the brains in suits will tell you that the current economic crisis will carry on through until at least the end of 2009, which is a rather sobering thought. How will this affect business in the motor trade? Again some analysts predict a 20-30% fall in new car sales and fewer franchised dealers covering a wider area of diminishing customer base. The trend of downsizing and buying more economical lower maintenance cars will most likely continue, although as we have recently reported some customers are appreciating the massive discounts applied to high end expensive 4wd and the like and big volumes of them are being sold.
We will also see consumers keeping what little is left of their cash in their pockets and opting to fund the vehicle rather than an outright purchase; as the old adage states ‘If it appreciates buy it, and if it depreciates rent it”. This is truer now than ever where in an uncertain market car makers need to keep selling cars worldwide to keep in business, but will also have to face the prospect of Sterling at an all time low against the Euro; will it be profitable to export cars to the once untouchable UK market? If this is the case and manufacturers continue to explore the emerging markets then this could lead to prices of used car examples hardening and perhaps actually rising in the 2nd half of 2009 as a result of fewer new sales and the knock on effect this will have.
Most dealers we have surveyed have set realistic plans in place for next year but are still cautiously optimistic that they can survive but are looking to F&I, add-on products and their service departments to make their 09 budgets achievable, and as we have predicted many times the car itself will increasingly be a tool to create profit opportunities for the dealer network.
The stifling standards that many franchised dealers have endured over the last 10 years will surely be eased and targets revised. Forced registrations and demonstrator targets will be scrapped as manufacturers re-think how they will assist the “chosen few” successful dealers to carry their brand flag forward in the tough times ahead.
How will this affect the car buyer? crucially, in the short-term at least, whatever car they choose to buy will be the cheapest it has been for a long time and whether it is a new or used purchase the funding solutions are market leading when compared to high street lenders and unlike the banking sector where the trust between lenders has broken down to the extent that they cannot or will not lend to each other, car financers know that they are lending on a transparent basis and are in control of who, how much and how long they lend for because they set their own lending criteria. Loans therefore are cheaper and with cars less expensive, the loan is consequently more affordable.
The other things to consider of course are the other sources of car buying, independents, car supermarkets, auctions etc. All of these have improved their standards immeasurably in recent years and the best among them will survive. The investment they have made in on-line technology and marketing will provide customers with greater choice and hopefully more peace of mind. Auctions in particular have endeavoured to make it easier for private buyers to compete in the halls by giving them more information and buying security when buying on-line.
Where will we be in 12 months time? hopefully the best businesses in each sector will be providing great service and value for money to lots of customers who embrace the improvements. Manufacturers will invest further in much better eco-friendly examples of their fleets which provide alternatives to the current over-reliance on oil, and therefore push the motor trade into the forefront of future technology and alternative ways of running motor cars.
No doubt it will be tough and the casualty figures high but the trade in general may emerge fitter, healthier and, dare we say it fairer.
We will, of course, keep you posted.