As MTI has been saying since December, demand for used cars has reached unprecedented levels and indeed records have been smashed right across the board. All of us in the trade have speculated as to why this has happened and the one fairly consistent theory is that it’s been, in most part due to the rapid depreciation of cars in the latter part of last year.
Franchised dealers, supermarkets, wholesalers, manufacturers, auction vendors and auctions themselves have roared off the grid in 2009, the only sector which seems to have struggled have been the independents, who really have seen the trend from last year continue unabated. There seems to be no rhyme or reason for this other than the fact that maybe because nearly new cars have been so cheap buyers have not looked further than main dealer stock. Add to this the manufacturer backed finance packages which have been so competitive and the rise of the PCP, which dealers are selling as “depreciation busters”, then this must surely have an affect on the smaller dealer’s ability to compete.
The smaller dealer’s fate is made even worse with all the major auctions reporting record attendances and sales figures which will ensure that the stock usually bought for retail by the independents is yet more expensive. The auctions themselves have broken volume sales records with Manheim having sold more cars at some of their branches than EVER before and BCA reporting massive sales volumes at nearly all their centres.
The problem, as some people see it, is that in the rush to shift metal in late December and early January cars were marketed very cheaply in order to create interest which clearly was there anyway. How long will this last? Well demand is outweighing supply in many areas and the problem facing many dealers is quite simple. Do we join the masses and pay over the odds in the hope that increase can be passed on to consumers? Or Wait to find the right stock at sensible prices whilst acknowledging that there may be some seriously empty looking forecourts?
We suspect it may need to be a bit of both, but with the way February has started many dealers are already stating that things have started where they left off. Certainly these are interesting times and not much fun for the inexperienced. If the tap turns off dealers could face the real possibility of overpriced used stock, weak demand on new cars and price increases by their franchise masters, who would be a motor dealer right now?
Perhaps a banker?