With 2009 now in full flow and Christmas a distant memory it’s interesting to see just how quickly dealers have emerged from their corners with their gloves up. As we have reported demand is at an unseasonal high with dealers reporting record volumes onused car sales, with sales promotions and massive price reductions, consumers have never had a better opportunity to acquire a genuine bargain. We have seen some cars selling at 60% of their original value at a year or so old and finance deals which allow these customers to consider an unprecedented choice in the car trade.
However the flip side for the franchised motor dealer is the dramatic effect this selling surge is having on new car sales. It’s well documented how this sector has declined rapidly and obviously dealers will look to any avenue possible to ensure they turn a profit, if they cannot viably tempt buyers into new examples of their vehicles. This however provides a serious problem for car makers, who are already under tremendous strain and seemingly no nearer to gaining any assistance from government to ease their plight during the downturn despite pressure from the SMMT (Society of Motor Manufacturers and Traders) and RMIF (Retail Motor Industry Federation). The problem which seems to be arising is that with used car examples being so cheap now, even the most ardent new car purchaser has to consider a 6 month to year old example with the financial argument being so compelling.
When you consider that as recently as 2 years ago there were some car franchises which could sell nearly new versions of their product for almost the original list price to customers who wanted to have immediate satisfaction and in some cases (Audi TT or Nissan 350 to name a couple of examples) we even heard of them selling for more than list! Meaning your new car disciple could easily justify buying brand new over very recent. How the worm turns though, and now manufacturers need to find a balance between setting a competitive retail price, ensuring their franchised dealer network can continue to sell volumes profitably but also to keep building quality cars and paying workers sensibly to build them, not too much of a challenge then!
The upshot could very well be that in the short term – as used cars will eventually almost certainly be in limited supply – the prices could actually rise. The volume manufacturers who are committed to selling their ex-rental and lease stock directly back to their franchises will need to decide whether to keep prices low in order to continue to ensure the ‘wheels keep turning’ or re-set the wholesale prices to try and make it attractive for sales people to kick start the new car market.
Lets face it with no new cars there cannot be used cars anyway!
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