There are gaps appearing on forecourts as dealers struggle to source the right kind of stock which they can sell on for prices which remain attractive to buyers, whilst at the same time do not further erode profits which have been under pressure for some time.
The conundrum facing dealers is that they know what sells and what doesn’t sell but when the auctions are predominantly packed with high mileage, basic low spec fodder, there is even more of a premium placed on the “gems”, the “Alan’s” and the “lulu’s”.
To have empty sales spaces is seen as sacrilege in the motor trade and with customers demanding choice and value for money many dealers will have to compromise either on profit or price whilst at the same time ensuring they have cars that the buying public wish to buy.
As one dealer pointed out to us;
“it’s not as if there is a mad buying rush but the same cars are being fought over by many different dealers and you either pay the prices and hope you can pass on the uplift or stock something which may not be such a good seller.”
With car makers remaining bullish about how the market will be this year, there will inevitably be major incentives for dealers to sell more new cars either by pack deals or buy backs or self registrations. This may make a late plate used car look good value against the list price, but by the time dealers give away all the manufacturer backed incentives and potential low rate finance offers on a new alternative it could actually be cheaper to buy brand new! This will mean that dealers will be under pressure to stock older cars with perhaps higher mileage for a different audience and price point, and this is where the uniqueness of such cars can benefit both dealer and customer alike but only if the price of the car can be matched by the pedigree.
This is surely where independent dealers, who are not under the same constraints as franchised dealers and often have more expertise of operating in the 3-5 year old market place, will gain a competitive edge.
We have spoken to several buyers from main dealer franchises who admit that buying cars which are out of warranty and with more patchy service history will present a major challenge but one which they will all have to face up to. They may need to do this sooner rather than later as the buying decisions from consumers is certainly looking in some areas as though it is split between new and the 2-3 year old plus, with not much in-between.
This situation is not likely to improve especially if customers decide they will not pay the uplift for a more unique example, at which point it is likely that profitability will be under pressure as a result.
There is evidence currently however that there are quite a few buyers out there which the industry would generally expect in the first quarter of the year, but come the tougher months later on dealers will inevitably be competing for a share of a much smaller market coupled with a dearth of the aforementioned cars.
All in all the situation looks certain to sort out the men from the boys!
Subscribe to Motor Trade Insider by Email