It’s the time of year when buyers should be paying close attention to prices and making comparisons. As the market adjusts downwards, as is the seasonal norm, dealers are looking to rotate their stock as demand drops and there is only one sure-fire way of doing this and that is price reductions.
Many dealers have what we call a “stock ageing policy” which dictates how long they are supposed to retain a car in stock, and each precious space on the forecourt is expected to earn its keep throughout the year.
The concept behind an ageing policy is making sure working capital is used wisely and that the ‘stock turn’ (or the amount of times per year that the same money is used to buy another car) is closely managed to ensure the financial health of the car dealership. Because most of their forecourt stock is funded by the banks this is costing the dealership on a daily basis so by turning stock around quickly the costs involved in stocking that car are minimised and the chances of making it a profitable space on the forecourt are increased.
A good stock ageing policy is between 60 and 90 days and if a car is not sold to a retail customer in that time then it can, and should, be disposed back to the trade in order to replace it with something else which will hopefully sell within that time frame.
No dealer worth their salt wants to hold an ageing stock profile and suffer the potential losses that this policy can have, therefore in quieter periods buyers can expect to find cars that are much cheaper than at the peak.
Taking aside seasonal models like convertibles, which can often be at least £2,000 cheaper than in the peak months, other models will often be much cheaper as dealers look to move the metal in anticipation of getting cash in the bank for the end of the year and taking advantage of any volume purchases which maybe available in readiness for the next wave of sales or promotions.
As a car buyer it is worth putting in a bit of effort and try to track the prices of used cars over a period of time as when they have been on the forecourt for 60-90 days they will be liquidated and subsequently will be the cheapest it’ll ever be.
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