What’s in a number?

The SMMT are releasing positive new cars sales figures month in month out, seemingly bucking the trend in the rest of Europe, but is everything in the garden as rosy as it may at first appear?

Scratch beneath the surface and the so called new car “sales” figures reveal a somewhat different picture.  We know for a fact that many franchise car dealerships from across the manufacturer spectrum are being heavily financially incentivised to pre-register vehicles by bulk in order to hit their targets.

Now whilst there is nothing new in this it does create the impression that the market is doing a lot better than it actually is. Out of the 2 million plus new car market how many of these cars end up with a paying customer at the end of the transaction?

Why does the SMMT make no mention of these facts when making their press releases, which are then spoon-fed and regurgitated by the mainstream news outlets? Registrations are simply not the same as sales, and franchised dealers are being forced to continually juggle new cars, pre-reg cars, target cars, quick turn demonstrators and late plate ex-daily rental used cars which will all have similar amount and type of potential buyers. This is then leading to the heating up of prices on 2-7 year old stock which is not always within the expertise of the franchised dealer network when it comes to selling this profile of car.

This is even having an effect on the sales of late-plate used cars because of manufacturer offers on new cars such as free insurance, deposit contributions, subsidised finance rates and free servicing.

The other aspect to consider is that most people now fund their new vehicle purchase via PCP meaning that, more than ever, we are deferring to the way our American cousins look at car ownership in that we are basically just renting and in 2-3 years’ time giving them back and getting another one (like a mobile phone).

What we have to ask ourselves is this market a bubble that will eventually burst? Because we know that artificially creating a market with over supply can only mean one thing – price deflation and pressure on residual or future car values.

Speaking to people we know, the main reason for this is that competition between manufacturers and the weakness of the trade in Europe means the UK is being asked to take up the slack caused by depressing figures elsewhere and the fact that none really makes a bad car anymore.