The road back to new cars

As we have been regularly pointing out on Motor Trade Insider, the gap between new and nearly new, in terms of retail price, has spent most of 2009 closing like a lift door, slowly but surely. There has certainly been a strange pattern – which appears only to be relevant in this country – and that is when certain new models are launched, and really catch the public imagination, it seems they become the “must have” vehicle and customers, and in fact dealers too, ignore all the usual rules applying to used cars and will appear to make strange decisions.

When the Audi TT first came out back in the 90s, or the Nissan 350 later on, demand was very high and supply very limited so dealers would sell nearly new cars and their own demonstrators and many other examples for thousands of pounds over the recommended list price. Customers, though totally aware that cars are supposed to depreciate, would pay the uplift just to have the car now instead of having to wait maybe 6 months or more for one. There are some signs however that, after the doldrums of last year, this is starting to re-occur. There have been several murmurings that many different models of cars, like the new Fiesta or Golf for example, are making up to 90% of the list price on the wholesale market, with dealers then having to put a dealing margin on top.

This of course means that anyone wishing to own one must pay the price being dictated by the market or simply go on the waiting list and be patient. An example of this was revealed in a conversation I had with a Volkswagen dealer. He told me he was offered a new Scirocco, for which he had a customer, and on trying to negotiate a price was amazed to learn that, on checking what the car listed as new, the price he was quoted for a 6 month, 8k miles version, was actually only £275 less!

There are certain cars, as we have mentioned, that down the years have been in this kind of spotlight but usually when the new car market has been buoyant and the demand has been exceptionally high. This would seem to be something more because there is a lack of used car stock about and some wholesalers of late plate used cars, such as ex-daily rental companies and large leasing companies not to mention manufacturers themselves, have decided to try and ask for a premium in the sure knowledge that dealers are desperate to stock forecourts. From an unsuspecting customers point of view now it really has to be a case of check and compare and if there is not at least some kind of saving to be had then it may be best to actually go for a brand new example.

When you consider that when a franchised dealer buys a car from the manufacturer he represents he will typically get between 15 and 20% off the price a customer would get and this obviously forms his profit margin. In simple terms the less of this he gives away in the form of a discount the more profitable each sale will be, so if a customer is looking to buy a nearly new example and it is being advertised at just 10% lower than a brand new example then clearly it’s time to take a step back and check out that new car.

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