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Used stock shortages trigger rush for poorer condition cars

VRA chairman Glenn Sturley

A race for vehicle refurbishing services could be sparked by used car stock shortages which are leading car dealers to downgrade the condition of stock they are buying to fill their forecourts, according to the Vehicle Remarketing Association.

Last month the VRA’s chairman, Glenn Sturley, said that car retailers were becoming increasingly dependent on profits from finance and insurance (F&I) sales to maintain a margin as limited supplies of used vehicles drove prices at auction near to retail values.

Now he has acknowledged that many car dealers are having to compromise on the quality of stock and focus on their own preparation expertise in an attempt to stock their forecourts.

Sturley, said: “Stock shortages – and subsequently high prices – have reached a point where many traders simply cannot get hold of the stock in the condition they want.

“Most of these traders don’t want to actually retail poorer quality stock, so the compromise they are making is to buy vehicles in poorer condition and then invest in making them suitable for their forecourts.

“Many buyers will inevitably be nervous of this shift. The challenge of accurately estimating repair costs through a visual inspection intensifies with the more attention that the vehicle requires.

“Conversely, when competition for the best vehicles is so high, vendors stand to more than recoup their costs if they improve the condition of their vehicles before moving them on – and removing the risk for buyers will be rewarded with the strongest wholesale prices.

“What all of this does also mean is that the general condition of the used car parc is being raised by a degree.

“Instead of grade three vehicles being bought and sold as grade three vehicles, their condition is being improved, so customers are generally being given access to better quality used cars.”

One retailer which AM spoke to this week questioned the current stock shortages, which come on the back of rising new car registrations in recent years.

He said: “I track the market and stock levels held by the auctions very carefully and they fluctuate quite wildly. I can’t help questioning whether the auction houses are failing to show their true hand. News of stock shortages inevitably drives values up and serves to maintain vehicles’ residual values.”

Demand for smart repair and paint services will certainly get a boost as a result of the rush to buy lower grade stock.

Stuart Foulds, chairman and chief executive of TrustFord, told AM that the AM100 retail group was battling to recruit staff in vehicle preparation roles in a bid to speed up stock turn in-line with its new TrustFord Now initiative aqnd reduce the need for third-party suppliers.

“At the moment we are even going into schools and colleges to see if we can help the tailor apprenticeships to feed into these positions,” he admitted.

Sturley suggested that retailers would be well advised to invest in their vehicle prepapration facilities as the market shows no signs of delivering a dip in used vehicle values any time soon.

He said: “With factors such as Brexit and general economic uncertainty causing consumer confidence to falter, we expect to see the used car market continue to remain buoyant in comparison to the new sector well into 2019.

“Certainly, there is no reason to expect that the current, high used car prices will fall, so the trade will continue to have to adopt strategies such as buying poorer vehicles and upgrading them for the foreseeable future.”

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