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Trade-ins seen as online weakness

Carmax, the American used car supermarket chain, advertises on television that it buys cars as well as sells them.

It recognises that most car buyers already have a vehicle they want to sell - a view that clearly differentiates Carmax from the increasing number of internet-based car suppliers which only want a one-way transaction, not a trade.

The inability of internet-based direct sellers and importers (as opposed to those who channel a sales enquiry back to a UK dealer) to offer a satisfactory trade-in process is a critical weakness.

Dealers must seize on this weakness if, in the words of professor Garel Rhys, of Cardiff Business School, they are not to “throw away their strong position in the current market”.

The failure of AsdaDrive, the supermarket car sales experiment in the late 1980s, was caused, in part at least, by the lack of a suitable plan for handling part-exchanges. Asda had no means of capitalising on the profit opportunity offered by good part-exchange vehicles - an opportunity which ensures the survival of many franchised dealers.

Ian Lancaster, Virgin Cars chief executive, has predicted that the UK market will be dominated by direct suppliers “within three years”. The company has said it will offer a used car trade-in facility within three months of launch.

But customers selling this way are likely to be disappointed with the trade price being offered for their cars. Unlike the dealer who is able to take profit out of several aspects of the transaction, direct suppliers are careful to separate out the selling and buying process. Paul Jarvis, Glass's Guide managing editor, has not seen any direct sales company offer a solution to the problem. While traditional disposal routes, like auctions and cash sales, are quick, they are unlikely to result in “full money”. Selling through the paper is time consuming and creates its own problems.

“You are still not guaranteed to dispose of the car,” said Mr Jarvis.

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