It has been generally acknowledged that few, if any, commentators whether inside or out of the motoring business have successfully predicted the course of events which have taken place in the last year or so. Although values started to take a seasonal tumble at about October 2008, it is fair to say the sheer pace and size of the decline took most of us by surprise. The word recession was just not supposed to be in our vocabulary according to the government who declared an end to the boom and bust economics of the 80s and 90s.How wrong we all were, the recession, or downturn as it was then, bit hardest of all in the motor trade and with franchised dealers and their paymasters embarking on disastrous pre and self registration exercises it was only a matter of time before profit was rapidly transformed into big losses.
Because of the lemming like nature of the business and the speed and size of the declines in car values they could only go one way, back up again and boy did they and how. There is not one dealer out there now who wouldn’t wish to turn the clock back and have some of the stock he literally gave away back in November and December last year. By buying more cars which were as cheap as they will probably ever be dealers could have probably recouped everything they lost and indeed turned those previous losses into massive profits, but hindsight is a wonderful thing. Let’s also not forget that the new car market was, and continues to be, a daily struggle despite the much heralded scrappage scheme, The market for new cars at a 30% decrease year on year, is probably, in reality, the natural level of the market in this country.
That was then and now but what about the future? Well we know there are fewer dealers now and that could continue into 2010. Dealers are still intent on bringing in sweeping cost cutting exercises and business principles are being encouraged to micro manage their businesses to ensure that they remain in the black and that every effort is being made to maximise opportunities.
Let’s then look at all the ingredients in the pot before we start trying to predict what may happen in the future;
The scrappage scheme.
Supply issues coupled with luke-warm demand.
Possible VAT increases in January (will they just go back to 17.5 % or as some are predicting could it go as far as 20 %?).
The strength of the euro against Sterling and further new car price increases.
The on-going recession and its duration?
How will car makers survive against stronger competition and a smaller global market place?
When will consumer confidence return?
When will consumers be able to get competitive credit facilities again?
Dealer credit for better cash flow continuing to hamper inventories.
Customers keeping are cars longer and, more importantly, ex-daily rental and leasing companies are too.
Throw all these components into the mix and trying to make predictions is not easy because general uncertainty is still a major issue as customers are not confident enough to spend money when they are uncertain about their own futures.
One thing we do know for sure is that just about anyone who has bought a new or used car at the start of this year would have got a great deal and indeed, as we have reported many times, some who bought in the 4wd or luxury and sports car section could even, due to the unprecedented falls last year, would actually made money if they were to sell now.
So at least customers have won in this sector of the economy and dealers who were in a position to buy large packs of cars have also reaped the rewards of historic low prices which should see them at least break even should the business start to stagnate again in the traditionally harder part of the year.