Close Brothers Motor Finance chief executive James Broadhead believes dealers need to prepare for an end to the “golden scenario” of strong manufacturer incentives as the current situation is not sustainable.
Broadhead said: “The pace of post-recession recovery has buoyed the UK market, as has a strong pound, but this golden scenario just isn’t going to be sustainable as manufacturers see new growth opportunities in overseas markets and boosted supply in the used car market drives down prices.”
Broadhead said dealers should prepare for manufacturers to start scaling back incentives like free insurance and bolt-on specifications. He advised dealers to start looking at alternatives for securing margins.
He said: “Dealers who have already stepped back from focusing so heavily on bonus payments, often at the cost of sacrificing short term sales, are better placed to deal with this new world.”
The call for action comes as speculation grows that the UK’s new car sales market is fast-approaching saturation point, coinciding with a resurgence in the used car market as recent years’ new-registration cars return to the forecourt.
This contrasts starkly with market dynamics of recent years, defined by manufacturers’ appetite to subsidise UK sales to win market share in Europe’s main growth market and a post-recession stock shortage propping up used car prices.
Broadhead said: “Forward planning is now the key for dealers, with a focus upon ensuring their used car offer is differentiated effectively from their competitors, and a renewed focus on listening and responding to consumers’ needs as new-registration purchases lose their allure.”