Dealers at risk over 'crazy' buyback deals

Dealers are putting their businesses on the line by signing “crazy” buyback deals, according to one of the UK's largest dealer groups. Camden Motors is warning that automotive retailers stand to lose hundreds of thousands of pounds on the short-term arrangements because the margin for error is tiny.

A typical buyback deal is a six- to 12-month agreement where dealers sell cars to leasing or rental companies and agree to buy the vehicles back at a pre-fixed price.This allows retailers to hit sales targets and unlock much-needed cash. Some ailing dealers use them as a short-term fix to offset wider cash problems.

But critics warn that buybacks have dire long-term consequences as dealers fail to offset back-end losses with up-front profits. Wrongly valuing a car by £500 could result in losses of more than £200,000 on a 400-vehicle buyback deal.

Camden's Jeff Peyton-Bruhl says: “We do not want to expose ourselves to unnecessary risks. If a dealer is expected to underwrite the risk, they need to set it against potential rewards.”