Trade guides move up but the picture’s still confusing

As we predicted the trade guides have moved upwards and although their values are moving in the right direction they are still seen by many in the trade as off the pace compared with current market conditions. According to some in the trade all we are seeing at present is a correction from the large declines seen in late 2008 and the real values of cars are more in line with what cars were selling for before all the talk of a credit crunch. It will certainly be interesting to see how the valuation teams at both CAP and Glasses negotiate the next few months in terms of how they call the market. Certainly many of our sources tell us that stock could remain hard to acquire until at least September with many rental and leasing companies having not taken up the volumes which traditionally at this time of year would see a greater number of late plate used cars coming to the wholesale market.

Many manufacturers who supply their franchised network with stock are also predicting much fewer numbers for the foreseeable future, although a reason for this is that they have sold unprecedented volumes in the first quarter, this has left many of them cancelling their auction sales and being reluctant to sell in any great numbers to their networks.

This is seen by many as a sign to keep filling the gaps, but whilst demand is high some dealers are sceptical that they can pass the rises on to their customers. Should demand suddenly waiver, with Easter just around the corner, many are fearful that if they are not selective in the stock they buy they could have major problems in shifting it if there is a sudden downturn in the market.

We believe that if the current stock situation continues then dealers can carry on paying what the market is telling them and customers will carry on coming to the showrooms. However these dealers need to ensure that complacency doesn’t creep in and that they carry on treating customers as precious cargo, if not then they will run a real risk of watching stock turn decrease and volumes slow down.

The importance of comparing trends will also help when making buying decisions. For example, if you know what you are selling is selling well but you have to pay top money for it then at least you can be fairly safe in the knowledge that you are stocking the right profile of cars to keep the momentum going.

From a customer’s point of view the situation must seem quite confused; if they were to believe the news headlines they would rightly think they could walk in to their local car showroom and demand literally thousands of pounds off any car they choose. Though this may be the case with certain brand new models there is a real difference between new and used which customers may not readily understand.

Customers still have the upper hand as they can compare and prepare before making that buying decision and with many dealers feeling confused about how to move forward in terms of selling strategy, there will be a mixed message when it comes to prices advertised for stock.

For instance one dealer we spoke to is so busy that he is afraid of running out of stock and where he will usually carry in excess of 80 cars, he currently has less than 40 that are retail worthy, so his strategy is to maximise his profit opportunity on every car in line with his showroom demand. Another we spoke to, albeit in a different geographical location but selling the same product, wants to carry on keeping his prices as competitive as possible so that he can be at the top of a customer search for those models but relinquishing his opportunity to be as profitable as he perhaps could.

So buyers can still eke out a good deal and dealers, who follow the correct process and keep the customer satisfied, should ensure that the business continues to navigate its way out of this downturn.

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