With that as a background and another expected increase in new car registrations this year,  again fuelled by PCP deals,  what can we expect in the used car retail market?

One virtual guarantee from the amount of retail PCPs is that cars will return to dealers in two or three years’ time with average mileage – perfect for retail stock. When that begins to happen, will it change the situation we have at present, in which dealers are having to pay a premium for good stock?

It certainly seems hard to escape that conclusion, especially with our own dealer survey continuing to reveal only a quarter of independents currently happy with their stock levels.

Ex-PCP stock will give franchised dealers an advantage

The problem, of course, isn’t really a ‘shortage’ of good quality cars but the perceived premium that must be paid to avoid buying too much work. And the issue is felt most strongly as a threat to margins. Never a week goes by without me hearing from at least one dealer about worries around the profitability of used car sales. Whether it is driven by the high trade prices they have to pay for stock, or the difficulty in competing with ‘give-away’ new car deals, there does seem to be increasingly little room for negotiation over price and the maintenance of profit.  

It will be independents who feel this most strongly because they are not guaranteed the return of prime retail used stock from the new love affair with PCP deals. We have spoken here before about the importance of diversifying or finding your own niche in order to preserve margins. What is the point in trying to compete on price when others have a built-in advantage over you in not having to go out and chase that prime stock? This kind of thinking will be even more important in the months – and years – ahead.

The only certainty in 2014, therefore, is that leverage will continue to be exerted on the new car market and that this is building an advantage for the used car departments of franchised dealers.