It is widely believed that the increase in VAT from January 11th will stimulate new car sales in the second half of 2010 and that the industry will welcome an increase in sales during the traditionally quieter periods.
However some believe that car buyers will merely be bringing forward their purchase decision leaving a hole in the overall sales next year when the VAT increase actually kicks in.
I believe that car franchises have learned some painful lessons in the last few years and some bad practices have thankfully been consigned to the dustbin of history.
They are now far more resilient and will quickly acclimatise to the extra pressure by being more creative and finding innovative ways of creating more business.
We found that when embracing the scrappage scheme, for example, dealers made the absolute most out of it. Short term, after it ended, it did have an effect on sales but car makers and dealers are now once again finding ways of ensuring that buyers are enticed into the showrooms and will certainly do so with alternative offers designed to negate the rise in VAT.
New car margins will clearly be affected by the rises and dealers will need to decide if they pass on the rises to the customer or absorb them.
By going all out with strong marketing campaigns hopefully volumes will not be too badly affected, and the buoyancy which is always felt in the first quarter of every year will give the industry the momentum going forward,
You can already see the headlines ‘come and beat the VAT increase with our stunning offers, keep the money in your pocket and not the chancellor’s!”
Or words to that effect.