AM Online

Falling used car values to hit plate-change profits

Dealers fear that difficulties in underwriting trade-ins, due to rapidly declining used car values, could have a knock-on effect on their September new car sales.

Retail orders placed weeks ago ready for the September 1 registration plate change could leave some motor retailers with little margin if the depreciation of the trade-in has not been carefully considered.

Some prestige brand dealers report that, having agreed a part-exchange price with customers more than six weeks ago when they agreed the order, they now face taking a hit on profits or backing out of the deal.

One motor retail consultant told AM he has a number of small clients with Audi, BMW and Mercedes-Benz franchises in this position.

“Unless the dealer wants to lose the customer he is stuck taking a part-ex for a deal that he will make a loss on,” he added.

“They could end up wiping out their profits for September.” A dealer said that having unsuccessfully tried more than a dozen deals for underwrites, he had to tell three customers he could not give a price for their trade-ins.

Another said that he has begun retailing cars that he would otherwise have traded on.

“The problem is the cashflow. But with modern sales channels, Auto Trader, Ebay, websites etc you can mix it with the independent dealers on non-franchise cars. There are F&I and warranty opportunities too,” he added.

He suggested that live auction prices, such as those from BCA or Manheim, could help dealers gauge the prices on a daily basis.

A spokesman for Manheim said dealer groups and traders who are account holders do have a competitive advantage because they have access to Manheim Market Prices.

“This allows them to track market trends and to identify not only the better performing models but also those vehicles whose values may be falling more than expected,” he added.

AM reported on July 11 that rapidly declining used values of large-engined cars and SUVs were making some dealers reluctant to accept them in part-exchange.

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