At the start of the year we checked in with car sourcing specialist Jeremy Sargeant (WR Autos) to get his opinion on how he saw 2009 panning out for his business. He spoke of starting the year with a “strong prospect list” but was obviouslyconcerned about finding clients for his service as the recession became deeper. We thought it might be interesting to catch up with Jeremy and find out how the first third of 2009 had gone.
“As I said previously I started the first quarter with a strong prospect list, so was not surprised that business was good. My business, as you know, is sourcing to order, mainly from my existing client bank and there are still plenty of orders coming from previous customers. I have also picked up more new business than anticipated. That business has come from a mixture of referrals and web generated leads. So, again, I started the next quarter with a strong prospect list.“
“However, despite managing to continue to do good business, trading conditions in the past few months have been a little unusual. For me the biggest issue in recent months has been the price of used cars. My clients listen to the news and know that used car prices are pretty strong. That is positive – I was having too many conversations with clients last year where there was a perception that they could take the asking price and knock huge discounts off. The problem now though, is buying quality vehicles at sensible prices. I find that I have to pay over book price for anything half decent and have seen vehicles in very poor condition achieving very high prices in the trade. The resellers I deal with are trading stock successfully (so they say) and a few trips to auction leave me wondering who is buying the stock at such strong money. The reason I am surprised at the prices is that I am not sure who is selling the cars!”
“I speak to lots of small independent car dealers who say times are very tough with low footfall. Main dealers I speak to are struggling to buy quality used stock, so maybe that is where the problem stems from. Maybe there is, as anticipated, a shortage of good quality used stock and supermarkets and main dealers are paying strong money for it. However, my experience covers a very broad spectrum of cars – not just main dealer and supermarket territory – and implies that demand is strong across all sectors.”
“For example trying to get an Aston dealer to trade out a decent 12 month old Vantage was a huge challenge. At the other end of the spectrum, I have had to pay good money for mundane vehicles in the £3,000 – £7,000 bracket. Bucking another trend is the 4×4 market. I have sourced a couple of supercharged Range Rovers and a few petrol engined Vogues and was surprised at their current popularity. Small 4x4s continue to fetch good money, although that is less surprising than the popularity of the gas guzzlers.”
“However, I have retailed only a handful of vehicles in the last few months. All were excellent examples of their marque and priced competitively. All took too long to sell, so I question whether the used market is as strong as everyone thinks.”
“So, in summary – I don’t know! Is there a massive downturn coming? Are there dealers with masses of unsold used cars? Will the impact of less new car sales be that used demand remains high? There are lots of ways to rationalise what is happening at present – the impact of low interest rates, companies buying less new vehicles etc. For me though, I just have to wait and see what the real situation is and how it develops in coming months. For now, as long as enquiries continue to come in as they are at present, the next quarter at least looks fine.”
What Jeremy has reported seems to echo what many in the business have been experiencing, though clearly the situation has eased since the heady days of Q1. The factors that Jeremy states such as low interest rates, lack of interest in new cars etc will continue to carry the market and clearly with levels of interest and showroom footfall still relatively high, it appears buyers still have an appetite for a deal.
The lack of quality used car stock will be the major issue, and many trade buyers we have spoken to report that prices at auctions, whether they be general sales or manufacturer backed, are still incredibly high, which surely indicates that demand is still there. However if buyers suddenly feel that used car prices are becoming too close to new prices – and the indication from some areas along with the much anticipated scrappage scheme may turn used car buyers to new cars – it may leave dealers with lots of potentially expensive unsold cars on their forecourts.
One clear factor is that the dealers who do the job correctly and treat every customer with the highest possible standards of care and professionalism will continue to report healthy trading; the ones that think these relatively buoyant times are here to stay and are apathetic towards their prospective buyers will come unstuck.
Let’s hope they all learned the lessons of complacency from last year.