When talking about trends in the motor trade it has become quite difficult to be totally accurate given all the different aspects which go towards announcing exactly what is happening.
It is confusing for car dealers but even more so for customers who may rightly be thinking exactly what is a good deal? A deal struck 2 weeks ago could look like an expensive mistake today but conversely as stock becomes harder to source and therefore more expensive on the wholesale market a used car bought 2 weeks ago might appear far more expensive in today’s classifieds.
All our guys have been visiting auctions up and down the country and have noticed a sudden increase in prices for stock which was hardly selling a few weeks ago. Not necessarily because it is particularly desirable but more because that is all there is.
Car dealers have to predict what is going to happen to a certain extent and the fact that wholesale prices go through the roof is not necessarily down to increased retail demand. Therefore the gamble is whether the price hikes can be passed onto customers whilst still retaining a sensible margin. This is the current situation; we know that cars with a USP will continue to sell and sell profitably but if those cars aren’t available then dealers, who cannot afford to have empty selling spaces, have to make a decision. Should they stock their forecourts with cars which are maybe a bit more in abundance and present the buyer with a much wider search choice? Doing so brings price very much into play.
One dealer told us that, because his company views each display space as a cash amount which has to be turned often to earn its keep, they even display cars which are almost a “loss leader” in that the car itself is unlikely to make a profit but sales execs are encouraged to maximise all other opportunities bolted to the car, like f&i, service plans, accessories etc. The car is just a vehicle (pardon the pun) for other profit opportunities. That way the space the car occupies is still turning a margin.
A high risk strategy maybe but as anyone in the trade will tell you “you can’t sell empty spaces” and successfully managing a portfolio of cars takes skill, expertise, lots of experience and a slice of good fortune. The successful dealers are usually the ones who have the most attractive displays with highly prepared cars at competitive prices, engaged employees and strong managers who are committed to gaining and retaining a dwindling audience looking for any kind of cost savings during this dreadful recession (or whatever the hell it is).
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