Almost half of franchised dealers say they are forced to regularly pre-register cars in order to meet manufacturers’ new car targets. It’s a figure that is likely to rise in the second half of the year as the market continues to falter in the face of rising fuel bills, higher car tax charges and the economic downturn.
Responding to a Sewells Information & Research survey carried out on behalf of AM, 219 of the 447 dealer respondents said they pre-registered cars last year and were continuing to do in 2008.
Most – 68% – pre-registered fewer than 49 vehicles last year; 20% pre-registered between 50-100 cars and just over 11% pre-registered more than 100 cars.
However, 94% of dealers believe that pre-registering is bad for the industry. It ties up money in stock that they would not choose to buy and creates an imbalance of cars that is too heavily weighted towards nearly-new.
This prevents dealers from sourcing the two-year-old cars that the market wants and that offer greater profit margins.
Adrian Rushmore, managing editor of Glass’s Guide, said: “Nearly-new is the most competitive sector because everyone has got them.”
Many of these cars end up on car supermarket forecourts or internet websites often advertised at prices that undercut franchised dealers.
Asked which manufacturers are most active in the pre-registered market, dealers named Vauxhall top, with 15% of respondents claiming it was the worst culprit.
Two French manufacturers were next – Renault (10%) and Peugeot (9.2%) – followed by Fiat (7.2%). BMW is a surprise fifth on 6.4%, way ahead of premium rivals Mercedes-Benz (2.8%) and Audi (1.2%).
Industry insiders also point to Ford and Volkswagen with one adding: “Just do a search on Auto Trader for sub-six-month stock and you’ll see who’s doing all the pre-registrations.”
Pre-registering has long been seen as the real driver of new car sales figures which makes a mockery of the Society of Motor Manufacturers and Traders’ monthly figures. Estimates on cars ‘sold’ in this way range from 200,000 to almost 400,000 – almost 17% of last year’s 2.4 million new car market.
According to CAP figures, almost 400,000 cars under six months old were sold last year. Even taking into consideration dealer demonstrators and manufacturer company vehicles, it’s a sizeable chunk of the market that is primarily pre-registered, according to CAP operational development manager Mark Norman. “This stock is competing with dealers’ new stock and it’s Catch 22,” he added. “If the price gap isn’t big enough between new and nearly-new then people will naturally buy the new car; if the gap is too big then it will affect depreciation.”
Norman expects the situation to worsen because carmakers have already ordered their stock for the year. “We are in an oversupply situation. Until the manufacturers can turn off the tap, it won’t improve,” he added.
It’s a view shared by his counterpart at Glass’s. Rushmore believes dealers are “at breaking point”. “I don’t think they can take much more,” he said. “The market conditions will become progressively more difficult as we go through the year and manufacturers have got to recognise the pressures that dealers are under and support them.”
Rushmore puts much of the blame for pre-registering cars on the volume-based bonus structure. “It puts dealers in a corner and forces them to pre-register. They take the bonus, but they also take the pain,” he said.