Combine this with block exemption reform and the threat of direct lenders dealers could be looking to a bleak future.
However, it is not all doom and gloom. Recent figures from the SMMT show that May was the 20th consecutive month for growth in new car registrations and it is up by at least 6.5% on May 2001, so the market is still there, but it is up to the dealer to use other avenues in which to keep their profit margins up.
According to the FLA, the amount that consumers are borrowing has increased by 5.5% on April last year and the number of new cars sold to private customers on finance increased by 42% compared to April 2001. This may partly be due to the fact that finance is easier to get and cheaper than two years ago. With this in mind, dealers should be capitalising on the consumers demand for finance packages to maximise their profits, particularly as profit margins on cars are decreasing.
There are a host of new and innovative products available to the dealer, varying from extended warranties to healthcare schemes, which take care of the vast majority of car maintenance expenditure. However, these are all optional extras for the car buyer and the dealer should also consider offering products that a car driver has to have.
With the current car insurance prices predicted to rise by up to 40% in the next year, how many other insurance companies, supermarket chains or retail stores can guarantee a competitive fixed rate for up to three years? No matter how good or safe the driver is, accidents do happen, so having insurance fixed for up to three years, regardless of claims has got to be a bonus for any driver. And having a fixed rate when premiums are certain to soar promises further peace of mind.
The ASAadvantage programme, which offers multi-year fixed price insurance - irrespective of claims, has been a great success amongst dealers. The average commission per unit sold in the last six months of 2001 was almost £400, and last year some motor retailers almost doubled their annual profits through ASAadvantage sales.
What's more, it is flexible enough for the dealer to control so that as well as saving the consumer money, it can be used when negotiating the sale and may even help clinch the deal on the car.
The retail motor industry has never been so competitive, and as the customer demands cheaper cars, profit margins will get narrower. As with many industries, dealers should be expanding their horizons, looking for other opportunities so that they are more than 'just a vehicle outlet'. Dealers must put the time into selling value added products, so that they give their customers value for money, peace of mind and the opportunity to drive the car straight out of the showroom the same day."