Decision time for used car dealers

With the scrappage scheme broadly seen as a positive package for much of the market, dealers are bracing themselves for the fallout when it ends. Many predict that due to the demand the money set aside by the government will soon run out. The feeling from many dealers is that because of the similar profile of cars which are popular in the scheme they may not be able to satisfy those orders on time and therefore upset an already fragile customer base. The other aspect many car dealers have to consider is that prices for used cars show no signs of cooling, meaning they basically have a decision to make.

They can continue paying the money and hope to be able to carry on passing these increases on to buyers in the knowledge that there are still savings to be made against new and no dealer wants to hold an ageing stock profile and suffer the potential losses that this policy can have, or not buy these expensive used cars and battle on with trying to generate retailable cars through trade-ins.

As popular as the scrappage scheme has been for dealers who have a good stable of small to medium sized economical cars, the fallout has been a severe lack of trade-ins as a result. As we move into a traditionally harder time for car sales, customers may find that the choice of used cars becomes limited but the price remains high. From a dealer point of view they need to decide whether to keep buying expensive stock, and acknowledge that margins will come under extreme pressure, or carry on trying to maximise profitability in the knowledge that certain models with certain specifications are almost impossible to replace and therefore should yield a decent profit.

With so many things happening in the motor trade in the last year or so, it is no wonder that opinion is divided and in the same way that no one predicted the major losses and subsequent gains which affected used cars, no one really knows what will happen in the near future. With fewer dealers selling fewer cars this year the future looks to be uncertain and dealers who closely monitor the situation will probably be more likely to continue the great successes made so far this year.