They just need to take a different approach.
Consumers are being bombarded with press reports about the credit crunch and that’s starting to put them off making big purchases.
The Bank of England claims the number of mortgages sold in March fell to its lowest figure since 1995.
Meanwhile, house prices fell for the fifth consecutive month, with the annual rate of growth reaching 1.1% – the lowest figure in 12 years, according to Nationwide.
And that’s key because many consumers use funds from remortgaging to finance a car purchase.
Now they might be more inclined to listen to an offer at the dealership.
In the automotive sector, demand for new cars has slipped slightly this year by 1%, although forced registrations are artificially sustaining the figures.
It’s likely to get worse.
Welcome Car Finance, part of Cattles Group and one of the biggest sub-prime lenders, tightened its loan criteria last year, then discontinued its hire purchase loans for third party customers last month to focus on more profitable operations.
As carmakers feel the squeeze – Ford, for example, saw an 88% drop in the profits of its credit arm last year – the fear is further downward pressure on sales as they become less able to offer competitive loan rates.
Meanwhile retailers and repairers are finding it harder to access money from the banks to ease cashflow worries.
It’s put many in crisis.
#AM_ART_SPLIT# According to Plimsoll Publishing, 50% of new and used car dealers are reporting declining sales.
More than a quarter are operating at a loss, and one in five is expected to disappear if the trend continues.
The situation is even worse in the aftermarket where a third of the UK’s top 850 repairers are operating at a loss and 60% have reported a drop in margins.
A quarter of repairers and half of dealers said they had become more dependent on short-term finance.
With banks reluctant to extend overdrafts or lend more money, it is leaving them vulnerable.
But every crisis reveals its own opportunities, and for the finance and insurance sector, this opportunity is in the older used car market.
Figures from auction house Manheim show average used car values up 3% to £6,723 for the first quarter of 2008, and sales volumes less than 1% down on the same period of 2007, showing dealers are keen to take on used stock.
Consumers are changing their buying habits, opting for cheaper, older vehicles.
As a result, point of sale motor finance, which has been in steady decline as high street lenders undercut dealer offers, could see an upturn.
Login to comment
Comments
No comments have been made yet.