Dealers more confident but expect a long and rocky road to recovery

Dealers are more confident about the prospects for 2012 but it will still be a challenging year according to findings from a recent Manheim survey sent to over 5,000 franchised and independent dealers.

Used car sales are predicted to rise with 36% of respondents expecting to see an increase while the overall business environment could be better with 24% of respondents expecting to experience an improvement in margins.

The survey suggested that the used vehicle sector performed better than the new vehicle sector in 2011 and this trend is likely to continue in 2012.

Overall, 78% of respondents believe that used car sales will either improve or stay at similar levels to 2011 and 22% think they will worsen.

Meanwhile 65% of respondents expect to experience either an improvement in or the same levels of margins but 35% expect to see a decrease.

2011 was a difficult year with 52% of respondents seeing a decrease in margins and 43% a fall in used car sales. But it was not all bad news as 15% of respondents experienced an improvement in margins and 27% saw an increase in used car sales.

Of the respondents selling new cars 23% experienced an increase in sales during 2011 but 51% saw a fall in sales. Prospects for 2012 seem slightly better with 32% expecting an increase in new car sales and 36% a decrease.

When asked what the main challenges for 2012 would be the top five where:

-Sourcing stock
-Finding customers
-Buyer confidence
-Cutting costs and squeezing margins
-Cash flow

The top five opportunities in 2012 are expected to be:

-Selling more used vehicles
-Diversification
-Entering new markets
-Income from finance, insurance and extras
-Less competition and take-over opportunities

Craig Mailey, Manheim marketing director, said: "The fact that many dealers seem to be more confident about the prospects for 2012, even though challenges remain, is encouraging.

"The economic uncertainty will continue to put pressure on dealers’ margins while an increase in consumer confidence will be the key to any improvement in both used and new car sales.”