Used car dealer Carcraft went into administration at the end of April.
The Carcraft Group, comprising CC Automotive Group, UK Car Group and Pennine Metals A, has been known as one of the UK’s largest secondhand car dealership supermarket chains, with an annual turnover of £120 million. Carcraft sold over 12,000 used vehicles each year, at an average price of around £9,000 per vehicle, and employed 500 people across 10 sites nationwide.
But what effect will that have on the motor industry and what are other independent car dealers saying about it?
Administrators at Grant Thornton said it suffered from poor market reputation, lack of investment, a high cost-base, expensive loan note financing and an insolvent balance sheet – all of which contributed to its closure.
The group also has legacy PPI claims against it. According to the administrator, the company also recorded losses of around £8 million annually for a number of years.
AM spoke to some independent dealers about any likely impact on the UK car supermarket sector.
Specialist Cars’ Umesh Sumani, based in Stoke on Trent, said: “I was staggered to read that the loss was that high. It seems it must have lost focus on the core business or simply its ‘business model’ doesn’t work any more.”
Administrators advised that a sales process, which was ultimately unsuccessful, had been ongoing since February 2015.
Jim Reid, director at Jim Reid Vehicle Sales, said: “I think there will probably be a significant change in how car supermarkets operate in the future. Supermarkets, as we know, are about ‘stack them high and sell them cheap’, but this can only be sustained if there is a steady flow of quality stock.
“If the quality is not there, then the recondition spend increases and the margin drops, so it is a very tight line. Done right, it’s a money maker, but done wrongly – well, Carcraft.”
Reid believes the group’s closure will result in more skilled people in the marketplace, available for work.
He said: “If you look positively at this, it can be a blessing to some of the more successful expanding dealers who are looking for fully trained staff for their new ventures.”
Former Carcraft directors Andy Coulthurst and Robin Bridge set up a Facebook page for its redundant staff to post their CVs.
Reid added: “I don’t think the industry will witness a flood of low-price car auctions causing a big impact on values across the country, because the company administration has to get the best price for the stock of vehicles to ensure creditors are not left being owed hundreds of thousands of pounds.”
The closure has meant that a large number of used cars will be available, potentially at a very low price, depending on how the administrators deal with the group’s assets.
Alexis Cassey, of Prestige Diesels in Portsmouth, said: “It will be interesting to see whether the increase of stock in the market will lower prices for a time, though we as yet haven’t witnessed any change. I don’t think there will be much of an adverse effect on the UK car market, due to the number of big players that will be ready to fill their shoes.”
Imperial Car Supermarket’s managing director Mike Bell said: “I’m sure many other dealers will also have been shocked by a big name in the motor industry going bust.
“But Carcraft’s demise was inevitable, due to them failing to recognise that all customers, whatever their personal financial position, deserve the best possible outcome. Inflated pricing, whether it’s the retail price of the vehicle or the cost of financing, needs to be as competitive as possible.
“A customer will research all of the vital factors when mapping out the buying process while sat in the comfort of their own surroundings. It is not only extremely unfair but also very naive to think customers are going to pay several thousands of pounds more than is necessary.”
The consensus among independent dealers is that there will be no negative impact.
Automotive industry charity BEN has offered support to those who lost their jobs in the closure, encouraging ex-employees to utilise its support service. The charity has access to services such as counselling, as well as short-term financial aid.
Joint administrator Joe McLean, at Grant Thornton, said: “In the three months prior to Carcraft entering administration, efforts were made to try to identify a purchaser. When these efforts failed, the directors arranged for the group to be placed into administration.
“On April 30, Daniel Smith and I were appointed administrators. With no purchaser in sight, and no funding available, it was necessary for the administrators to close down all of the group’s operations and to inform the vast majority of staff that redundancy was unavoidable.
“A skeleton staff has been retained and these individuals have been assisting the administrators in dealing with enquiries from customers and creditors.”