The pre-owned car market has been a major source of business for dealers in 2009 and brought hundreds to the AM Used Car Conference last month, keen to hear what the future holds.
Following our first report on the conference in AM’s October 23 edition, which featured Glass’s Guide’s Adrian Rushmore and Parker’s Kieren Puffett, here we present the remaining speakers.
Phil Robson, Peugeot UK
Dealers need to plan ahead to allow for the future impact on the used car market of manufacturers’ current strategies to ride out the recession, warned Phil Robson, Peugeot UK’s director of fleet and used cars operations.
The weakness of sterling and recessionary impact have led carmakers to reduce short-term rental supplies and forced registrations.
The drop in new car sales could help keep used car values strong come 2012 when around 1.7 million new cars will come back on the market as three-year-old stock, compared to the 2.2 million of recent years.
The recession has hit the light commercial vehicle market even harder. Robson predicted the 48% drop in new van registrations will lead to a “huge shortage” of three-year-old vans in three years time.
Scrappage has taken 400,000 cars out of the bottom end of the market, but these customers cannot be relied on to trade in their car in three years.
The positive of this, he suggests, will be lower volumes but at higher prices and margins.
For customers to pay the higher prices, dealers must focus on quality and value.
“If we’re going to be asking customers to pay three year old money for a four-year-old vehicle then service and how we present ourselves will be critical to making the consumer feel they’re getting value for money,” he said.
Dealers will need to stock their forecourts in accordance to the supply constraints at a price based on their cost to replace, Robson added.
Mark Norman, CAP
The proportion of dealers having difficulty sourcing used car stock has shot up from 65% to 90%, said Mark Norman, operational development manager at CAP.
However, many had enjoyed an increase year-on-year in sales and “the pessimism that was so rife last year and at the start of this year has started to go away”, Norman said.
But the market was reliant on carmakers’ activity.
“Once oversupply comes back into the new car market then we will start to see greater pressure on used car prices and they will start to come down,” he said.
A CAP price index based at the vehicle’s depreciation month-on-month shows that superminis have been depreciating at a lesser rate, which results in it being more desirable to the used car market.
Upper medium vehicles like the Volkswagen Passat and Ford Mondeo have been keeping up with the market and 4x4s have been underperforming for the last three years.
Norman said: “Marketplaces will return to trend. Superminis have outperformed the market and been a shining example for the last two years, but there’s little if no profit to be had with them.
“The lower medium sector is one that I would put my money on because it has more space to recovery and there’s more margin for dealers to operate within.”
Clive Sutton, Clive Sutton Premier Marques
Clive Sutton, former Chrysler dealer and now chairman of a motor retail operation that supplies prestige cars to the wealthy, spoke about the
innovation and expansion opportunities that the internet allows.
Although he has a showroom in north London, Sutton says around 80% of his customers don’t visit physically, instead deals are done over the phone or online.
A regularly refreshed website puts more emphasis on customer interaction.
Stock is attractively presented on the website, including through video footage, and if a required model is not in stock, customers can register for a car stock alert.
A configurator service also acts like a personal shopper for customers who want a particular vehicle and specification.
A dedicated computer in the dealership rings like a doorbell when a customer wants to chat online with Sutton’s team.
It also has a secure pay-ments site so customers can pay deposits online and reserve a vehicle.
For owners who wish to sell their vehicle, a brokerage service is provided, which will set a market value on the vehicle and promote it through its website.
“I want to achieve the scenario where we don’t have a showroom and business is done online,” he said.
Sutton believes networking, both physically and online, is essential to keep the business in customers’ thoughts. He uses Facebook and Twitter, but Sutton still believes “there’s a lot to be said for talking”.Steve Hood, Ford Retail Group
Online motor retailing is now so serious that Ford Retail Group has established a new brand, Ford Online.
It has its own managing director, Steve Hood, who is focused on building the web-based business and making it as customer-focused as possible.
He believes the website needs to be as accessible as the dealership’s forecourt.
A prominent search function on the homepage puts thousands of used cars at online visitors’ fingertips and the website encourages them save their shortlist and submit their details.
Its strategy has two strands – local, which focuses on its Polar, Dagenham, Brunel and Heartlands dealership brands, and national as Ford Online.
A remote sales team handles national online sales and shares the profit with stakeholder dealerships.
“Email leads are just as valuable as telephone leads,” he said.
For customer convenience, they can get part-exchange valuations through the website, based on details and condition, which are later verified by a Ford Retail Group dealer.
Hood also wants customers to find existing owner experiences and buyer experiences on the website.
John Simpson, Manheim Retail Services
Understanding the changes in how consumers choose their cars will help dealers succeed in the future.
Buyers increasingly research their potential purchases online and use the internet search engines and classified websites to choose which dealer to go to, so dealers’ websites and online marketing have to keep their stock accessible.
“The love affair starts with the details on the web page,” explained John Simpson, managing director, Manheim Retail Services.
Simpson stresses the importance of having stock displayed properly. Multiple, high quality, detailed images of each car will generate greater interest.
Other key aspects are getting your website high up in Google searches, being seen on popular sites such as Autotrader, Carmony or Parker’s, capitalising on social media trends for marketing and ensuring staff are treating website-generated leads seriously.
“If you’re not reacting to the way consumers behave today you’re missing out on opportunity and, potentially, you’re not in the game.”
Tony Gannon, BCA
BCA sees the used car market not as disjointed, but as robust, reliable and a long-term market. Tony Gannon, communications director, said he believes 2010 will be a stable year.
He said: “Dealers need to research their market and make sure the cars they are stocking are appropriate for the customers they are selling to.
“The answers do not change – customers are still looking for the right car at the right price.” However dealers need to ensure the customer’s buying experience is right.
Gannon said the supply side has been significant for this market. What BCA has seen is a shift in the market from the middle of September.
There has been a balancing of supply and demand. Stocks were increasing by as much as 25% and there will be a degree of restocking going on in December this year, he said.
He believes auctions will remain a vital source of stock for dealers and online bidding is growing.
Alternative sources, such as enticing customers to trade in their cars or targeting local SMEs for used cars, can be unpredictable and difficult, he said.
Chris Roberts, Thurlby Motors
Profiling used car stock is a straightforward task to ensure you carry the right stock, said Chris Roberts, managing director of Thurlby Motors, but often dealers just don’t do it.
By looking at what cars have made the most profit in the last 18 months, dealers can predict which prime stock to obtain.
Acquiring the right stock means looking outside the usual channels, said Roberts.
Alongside auctions and self-supplied vehicles, there are Motability returns to consider, an ever-growing database and responding to and placing wanted adverts.
It’s also important to have a used car ageing policy that is adhered to. At Thurlby Motors, if a car hasn’t sold at 45-60 days then its retail listing is re-priced. At 90 days the stock is removed.
When pricing cars, dealers must review competition on the web. Even if you undercut another dealer’s pricing by 50 pence, it will still benefit you in search listings.
Roberts added active prospecting is vital to used car sales.
Rather than see it as cold-calling, consider it relationship building with existing customers.
“Robust prospecting can achieve footfall, part- exchanges and an increased sales rate,” said Roberts.
“It needs a consistent approach and good staff training.”
He suggested sales staff should call five people a day. The objective is to make appointments. The sales team at Thurlby Motors are incentivised to make two appointments a day.
In the prospecting process, sales staff should establish as much as possible about their existing car and then find a suitable stock vehicle for the customer which creates the perfect reason to call them.
A dealer can say, for example, “I can save you £15 and put you in a new car.”
Roberts added dealers must use assumptive closes in the prospecting call to secure an appointment.