To use a well worn football phrase, its one game at a time, or rather one month at a time in the motor trade this year. In terms of a performance report for many car dealers in January it’s a question of “not bad, but could have done better”. However, considering at the same point last year we had lost about two weeks because of the snow and the ensuing chaos, perhaps the performance for January should have been much better than it actually was.
The terrible weather conditions in December meant there was a lot more ageing stock around in the New Year and coupled with the rise in VAT and the many and various January sales events have all conspired to have a detrimental effect on profits.
From a customer perspective those fortunate enough to be able to buy a new car this year will surely be able to get a good deal. However the talk from many dealers we have spoken to is they are going through the process with lots of prospective buyers but are unable to convert appointments into sales which indicate that buyers are not convinced they have found the best deal.
Many dealers this year in trying to keep up with the run rate are pushing for volume at any cost which can be a dangerous tactic if used car stock becomes limited, which is fairly likely. We are already seeing a situation where there are two types of car on the wholesale market; the ones which sell and make top dollar and the rest, there really doesn’t seem to be much in-between. As a result dealers have to be cautious when deciding whether to sell at a discount to the first customer who shows an interest as they may not be able to find a similar example for some time.
The other problem dealers face, which will also lead to a different picture for buyers, is that many dealers will adopt a policy of trying to retain profit in the chassis and forsake volume, however if this isn’t possible they could find themselves with neither. At least if a dealer sells a large volume of cars he is gaining more potential revenue through the workshop and obviously more opportunities to sell add-ons through the business manager and therefore achieve budget.
Many dealers are saying that profitability is around £250 a unit down year-on-year mainly because of the aforementioned reasons, but view the next few months as critical to achieve annual budgets and also meet manufacturer targets.
Car buyers, who by and large are becoming much more switched on to how best to research new and used car choices, will find quite different approaches from dealer to dealer, and if chasing the very best price on a car is your thing then perhaps you should be prepared to travel for it.
Dealers may be in for a tough time but they absolutely can influence the behaviour of all their staff by ensuring a complete customer experience and simply being the best they can be.
Subscribe to Motor Trade Insider by Email