By Philip Nothard, CAP retail and consumer valuation editor
Is a vehicle’s retail asking price influenced by geographical differences or its location in the UK?
Despite the continual pressures from the internet, is it still the case that you buy in certain areas due to the trade prices being lower, and sell in another, to take advantage of higher retail asking prices?
When we asked our network of dealer contacts whether they thought the geographical location made a difference to the prices you can ask, the answer was pretty clear.
Nearly everyone agreed that it does.
One local dealer said his average selling price is £8,391, which is 15% less than the national average of £9,887.
His research, within one franchise, shows average selling prices of £9,674 for the north, the Midlands at £10,042 and the south at £9,911.
If you review a select number of sectors on a three-year plate and average mileage of 20,000 to 30,000 across a reasonable coverage of the UK regions, we can identify some intriguing differences, with city car being only 5% higher in Wales than in Scotland and the London region sitting in the middle.
In the SUV sector, London outperforms Wales by as much as 27% – or £5,393 – and more surprisingly Scotland is positioned in the middle.
So, where should the dealer search to best position their vehicle?
This will depend on a number of factors: what is the general strength demand for it?
Is it something the consumer will travel for or can they get a reasonable choice locally?
How unique is the car in the market relative to its retail demand?
And let us also not forget the influence that overhead costs have on the margins set between the purchase price and the retail asking price.
It’s also interesting to compare factors such as variations in the retail value potential of different fuel types.
Here we can see, again using the three-year-old plate, that London prices are higher for diesel by as much as 23% and petrol as much as 21%.
What is even more thought-provoking is that Wales is outperforming Scotland on petrol but underperforming on diesel.
If we look at a 10/10 plate Ford Focus in London, and where it is in terms of the price, out of the 11 regions it’s positioned 10th, some £800 behind the highest performer – the south-east – but £400 above Wales.
So what causes these variances in asking prices?
Is it the climate, population demographics or even political factors?
Could it be, as suggested by many, that the presence of a manufacturer factory in the area has a bearing on how strong or weak demand is for a certain make or model?
Do consumers actually care, or is it a matter of searching for the cheapest, checking whether it’s within a reasonable driving distance and whether the logistics work out?
We asked dealers for their thoughts and 96% agreed that pricing was influenced by geographical location.
One believed the typical difference is £100-£250 on volume vehicles and as much as £250-£500 for the more prestige vehicles.
Another suggested that the public are not as focused on price as everyone assumes.
There are a range of options for dealers in relation to the regional price variation phenomenon.
For many it’s as simple as trying to be the lowest within a 60-mile radius.
Others cast the net even wider to capture every enquiry and tempt the customer to make a longer journey.
And then there are the dealers who prefer to focus on offering the best possible customer service and support, while simply maintaining a ‘reasonable’ position on the internet that retains an acceptable profit.
My view is that the greater your understanding of variations in taste and demand around the country, the better.
If you know whether you will generate more profit, more quickly, focusing on a diesel SUV or a petrol automatic city car, then you are in the best possible position.
There are many geographical and economic differences that will influence a buying decision and give the customer what they would deem to be a ‘fair price’.
What is certain is the internet has changed the way customers make their choice, and dealers are increasingly looking for ways to counteract the ‘sell on price’ attitude.