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AM Autoretailing: Used car values set to rise as stability returns

Stable values

 Dealers can expect used car values to remain stable over the coming months, but should still be cautious according to used car experts Glass’s Guide.

Adrian Rushmore, Glass’s Guide managing editor, said: “Used car activity is slowing and dealers have now acclimatised to recessionary times.

“Prices have started to stabilise, but who knows if there could be another disaster tomorrow which would throw things into chaos again. It’s very difficult to predict, but I do think it will stay stable.”

Peter Rand, managing director of Wokingham Motors and AM Used Car Retailer of the Year, said: “We have seen a large boom in older cars.

“Small run-arounds represented a 25% share of sales for us last year, but that has now gone up to 50% with an average selling price of £4,000.”

Rand said he had part-exchanges coming in for part-exchanges. Wokingham is trying to get more customers to come in so it can sell on the part-exchange cars to more retail customers.

The business then makes money on top of that by upselling aftersales packages.

He said: “About 50% of the part-exs that are coming in are then being sold on to retail customers. There could be a lot of money walking out the door by not selling on these cars to retail customers.”

Wokingham already displays its cars with environmental labels, not mandatory at used sites.

Glass's Guide Used Cars

The average price of a three-year-old car will be £950 more in December 2009 compared to the same month last year, according to Glass’s Guide managing editor Adrian Rushmore.

Speaking at AM’s Autoretailing conference, he predicted that three-year-old cars’ values will increase by 25%, compared to an average price of around £4,500 in December.

The prediction is based on Glass’s belief that a market correction is complete and there is now a good balance in supply and demand.

Cars valued between £2,000 and £5,000 are representing about 25% of all consumers in Glass’s online research.

Rushmore said: “Compared to last year, there is a marked difference. What we’re seeing is a significant improvement in consumer demand for cars priced at about £2,000.

"Elsewhere, if we look at the other price points up to about £18,000 it is marginally less. If you look at the price points beyond that, the same proportion of potential customers is looking for these higher priced cars.

“We must remember in terms of the total number of people who are looking for used cars, the overall volumes are down between 10% and 20%. The total demand is less, but the spread and pattern of it is not significantly different.”

Rushmore said it was important to bear in mind that customers initially search on price, but they actually buy on product.
“They want, first and foremost, not to feel that they’re being ripped off.”

One-year-old cars now account for 19% of all used cars on forecourt.

The supply of nearly new cars has dropped 40% compared to last year.

A year ago, there was a far greater supply of cars up to four-years-old.

Five-year-old cars and older are now more desirable because many of them reach a lower price point.

In Glass’s league table of most popular used cars, small city cars have been elevated from ninth place in 2006 to top spot and superminis from seventh to third. Premium 4x4s hold second place.

Scrappage scheme

Dealers concerned that the four months delivery limit for scrappage scheme vehicles might not be long enough have been told the rule will be reviewed if it becomes clear it is a widespread problem.

“If intelligence comes through that shows a shortage of small models which consumers are choosing and it becomes clear that it needs to be extended then it will be reviewed,” said Ian Parsons, policy and regulation manager in the automotive unit of business relations at the Department of Business, Innovation and Skills (formerly BERR).

“It is my understanding we’ve only had one order that has been placed with a delivery date of right on the line of four months,” he said.

But David Manchester, MD of Charters Group and Peugeot dealer council chairman, said Peugeot and Citroën are now quoting four to five months for some orders.

The comments came during a panel discussion on scrappage at AM’s annual Autoretailing Conference last month.

Other issues that arose during the discussion included who owns the scrapped vehicles, how the scheme will end and why nearly new cars and cars without MoTs were not included.

Peter Rand, Wokingham Motors: Who owns the scrapped cars?

Ian Parsons: The scrapped vehicle is of no value to us. My understanding is that the ATF (authorised treatment facility) keep the profit.

Marc Matthew, Lifestyle Europe: There’s an opportunity for dealers to earn money on scrapping the car. We’ve done a deal to get £100 for scrapping a car.

A dealer: Why does the vehicle need an MoT?

Parsons: Because we are taking old cars off the road and replacing them with new. We don’t want to be taking cars off people’s drives. 

Karl White, Thame Service Station: Why are nearly new cars not included?

Parsons: The scheme is to help the manufacture of new cars. The purpose is to help manufacturers build new cars. We wanted to limit the impact of the scheme from other areas of the industry. We are working with manufacturers not dealers.

White: My opinion is that they are interlinked.

A dealer: How much of the £300 million is going to be used up in red tape?

Parsons: We are keeping admin costs to a bare minimum. The team is just four people. The scheme in Germany had a budget of 10% for costs and has risen since. Certainly we are not looking at allocating 10% of the value of the scheme to administration. But the costs do come out of that money.

A dealer: What is the audit likely to entail?

Parsons: There will be an audit of the scheme itself and an audit two months in to see how the scheme is running and at the end. Some individual dealers will be audited as well as customers.

John Fairman, Car Co Group: We’ve got mixed message from our franchises on the treatment of VAT on scrappage. How can we handle that?

Parsons: Customs and Excise has issued a guidance note on the treatment of VAT in the scrappage scheme and you need to follow that.

Louise Wallis, NFDA: You do need to follow the line that your manufacturer has told you. You need to watch carefully how your DMS system is generating invoices because some are trying to put the £1,000 above the line which then of course creates a VAT problem.

Why websites are your most powerful sales tool

The battle for online supremacy has just begun.

Michael Ross, director of eCommera which helps retailers with their website business, made the bold statement after explaining how online retailers can literally sell anything to anyone, anywhere.

He said the traditional way of ensuring you were successful depended on where your shop was based and what you stocked.

However, with the internet location is not an issue and stock can be held in warehouses in a similar fashion to how Amazon operates.

Driving footfall is about ensuring search engines know your key words so your website is the first people see when they are looking for a particular product.

Your website’s ease of use then helps keep customers engaged while they look for what they want.

Ross said: “Competitors are just a click away. If I wanted to buy a camera I could go to various places on the web. So in the online world you have to think a lot harder as to what your point of difference is.

“Due to the internet, if I wanted to buy a car I would know exactly which one I wanted and how much to pay. The customer in the online world is much more in control.”

Ross said retailers who do business on the web must be aware they cannot build a website and leave it. A website created two years ago could be out of date today. The website has a different pace driven by technology.

Trading online requires more decisions. Ross said Amazon is the master at this and will make certain books available for next day delivery whereas others will be delivered in 21 days. It is about balancing demand and stock.

Customer satisfaction can be difficult to gauge online so it is important to monitor behaviour and see how long customers spend on the site and the amount they buy.

Ross said there are five key performance indicators to online retailing: how many people are driven to your site, how much profit are you making per visit, are you making the most of every customer’s visit, do you know what’s selling well and are people satisfied with the service?

 

 

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