Franchises re-focus on used car market

After the car market crashed in the final quarter of 2008, used cars have provided a better sales opportunity for dealers.

Wholesale channels report strong demand from dealers for quality used vehicles for their forecourts.

Many dealers reduced their used stocks towards the end of 2008 in line with the market crash, only to find a resurgence of interest after Christmas from savvy consumers looking to take advantage of the rock-bottom prices.

The resultant rise in demand from consumers, some of whom have changed their buying habit from new cars to young used models, has quickly driven up wholesale prices. Retail transaction prices of used cars have also begun to climb slowly.

Carol Stevens, national sales and marketing manager for remarketing company Cars Direct, says it is seeing franchised dealers looking further afield, particularly at older vehicles with higher mileages, as long as they are in good condition.

This has created more competition at auctions for the car supermarkets and independent used car traders who have typically sought such cars.

But, for some franchised dealers, this highlights a weakness, says Adrian Rushmore, managing editor of EurotaxGlass’s.

“Ten years ago franchised dealers were retailers of genuine used cars. That began to disappear as pressure from manufacturers grew around achieving new car targets on which bonus was based. They have become retailers of new and nearly new cars but to a far lesser extent retailers of genuine used cars.

“Now franchised dealers are again having to think about their operation as a used car business, but they have got out of the habit of selling four, five or six-year-old cars. The most important skill is vehicle appraisal. If they don’t appraise it properly they face losing the profit.”

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