Criteria extended as more dealers chase less stock

Dealers are reporting that demand is certainly holding up, but a lack of quality used cars at reasonable prices is having a real effect on margins. We are now seeing signs that customers are not willing to pay the uplifts which motor retailers have to pay on the wholesale market. Some are even saying that in order to avoid empty spaces on their forecourts they are paying more for their used cars, not increasing retail prices by similar amounts but trying to convince buyers that cars are priced to go. With the type of business that car sales is and some of the sales people now operating within it, selling cars at the sticker price is nigh on impossible. Seeing that the industry is seen to be in somewhat of a slump the perception of consumers is that there is a discount to be had on everything even though the downturn has really only seriously affected new car sales.

The auction houses continue to sell cars at record quantities and the buyers attending these sales are still fighting to acquire quality cars which continue to fetch top dollar. The situation now, as we predicted previously, is that more sellers than ever are looking to retail older cars which may not be what they would ordinarily do. However with no stock around they are forced to look at extending their criteria and preparation standards to enable them to offer a similar product at the other end of the market. The problems this will bring, of course, is more dealers chasing similar stock, suggesting that prices could increase yet further and traditionally main dealers who would perhaps sell cars to a maximum of 3 years of age and 40k miles may not have the necessary skills or understanding to sell older, higher mileage examples of a similar product,

This would suggest that if the sales people tasked with managing customer expectations are not aware of how to sell these types of cars, then it could lead to dealers actually losing money through the sales department but perhaps gaining income through the aftersales. These types of car invariably mean much more workshop preparation and consequently much higher bills which again brings major pressure on retail prices and dealer margins.

It will be interesting to see the reaction of buyers who maybe would not ordinarily think of going to a main dealer to buy a car like this as it would not usually be offered from such an outlet. But having discovered they can maybe buy a particular car from that source will their expectation of the price and quality of that car alter with the fact they are buying from a franchised dealer? Would they expect to pay more as a consequence of these factors?

Time will tell we will certainly keep you informed.

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