Could stability be returning to car sales?

This may be a message being regularly repeated by many people “in the know” this year, and one which will probably just as regularly be proved wrong. But the market, especially in terms of used car sales, is showing definite signs of cooling down. Of course there are pockets of the country where dealers will probably say that trade continues to be brisk, but those who sell new and used cars are seeing the scrappage scheme take over from the rampant used car performance of the first part of the year. With holiday season upon us and the kids breaking up from school this is traditionally a quieter time of year for car dealers and not just from a lack of customers but also a lack of staff, which can often lead to a showroom feeling empty.

However there is a distinct feeling in the trade that there has already been a slowdown in showroom footfall and sales of used cars are therefore sliding as a result. Dealers have seen wholesale prices rise dramatically this year in some cases as much as 25% as the bounce back happened in earnest and with supply severely diminished the search for quality used cars has intensified leaving more dealers chasing less stock and consequently pushing prices up. Until now they have been successful in passing on these increases to customers who have been prepared to pay the ‘market value’.

There are definite signs now that prices have reached a plateau and customers are again comparing the prices of new and used cars and in many cases the massive savings of 6 months ago have now all but evaporated.

Many commentators in the business cannot see this changing until at least September, if at all but certainly dealers have to work much harder to sell fewer cars to a shrinking prospect base, and volume and profitability will be affected accordingly.

The good news, however – before we get the violins out – is that many dealers have already achieved their annual budgets with still nearly half a year of trading left so we really cannot see the widespread depression of last year, but rather another correction in the next few months to stabilise the market.

If the economy can keep inching towards recovery there could very well be some good results announced at year end, and you never know there may be a few more Christmas parties than last year too.