A friend of mine is a buyer for a main dealer of a German luxury car marque.
Basically he says they are completely stuffed with demos and conventional used stock and even after the manufacturers bonus, they are going to lose almost a six figure sum on the demos alone.
He has has told me that one of the options they are considering is dumping all their old stock and re-entering the market aggressively marking down all bids - he is bidding at the moment on the basis of what he feels the car would be worth in 2 months as sales are so slow at the mo anyway.
So my question is, to your knowledge have any other dealers main or otherwise gone nuclear and just dumped their existing stock for the best price they can get in order to obtain stock at more realistic valuations? I know it happened in the early nineties, but am wondering about the current position today.
Edited by Whitney Paine on 08/05/2008 at 15:22
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I am a partner in a car transport co we do work for makers, importers dealers auction houses etc, about 30 percent of our work came from Auction houses but cars are just going round in circles at the moment sometimes going through the ring 5 or more times.
I would hope a second hand dealer on here would back me up as they must be finding it very tough at moment they however aren't dumping stock just sitting tight. Hence prices are down becuase a P/ex will take ages to shift.
Very often dealers will loan stock to show turnover ie "just arrived" but we moved a Landrover Freelander the other day and the VED ran out in Oct 07!!
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I would hope a second hand dealer on here would back me up as they must be finding it very tough at moment they however aren't dumping stock just sitting tight. Hence prices are down becuase a P/ex will take ages to shift.
I sell cars generally up to £2500 (sometimes more). I am finding that I am selling my cars reasonably quickly (1-3 weeks) for the price I want. The biggest problem I face is finding replacement stock, because the main dealers are quiet, without a doubt, so the px's are not coming in to feed the food chain.
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So is the car industry in a pickle at the moment? Are dealers slashing prices? Or are the news programmes/magazines overstating the situation?
I was reading an article yesterday which was saying that diesel cars are dead, diesel prices are too high to make them economical so their previous premium is over. Surely not?
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The cost of oil is putting pressure on everything, it happened the last time the price of oil doubled. Dealers cut prices and dumped stuff as they tried to cut high priced stock and buy at lower prices to stay in business. The difference now is the price of oil isn't going to come tumbling down to help reduce manufacturing costs.
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More than a grain of truth in that I suspect. I've been trying to sell my old BMW 525 since February, the biggest sticking point is the price of diesel. Given the increase in VED for newer cars it might now make sense to sell the Hyundai now and keep the Beemer.
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The used market seems slow at the moment. Go to any dealer and they seem to have a lot of cars cluttering up the place which isn't the norm for May. BMW, Audi, Land Rover and Volvo all seem to be cases in point but I'm sure it applies to others.
It is something of the nature of the beast for car dealers to moan - like weather for farming it never seems to be a good time but a lot of people are feeling the pinch and deciding their current car will do for another year.
Before anyone celebrates remember this also means the value of your current car is also heading south.
IMO a lot of people are closing their eyes and thinking the problem will go away but some dealer closures are likely. Auction prices also need to fall - sellers are asking unrealistic prices for many models.
All that said, the right car, in the right spec and at the right price will still find a buyer.
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I'm in the US at the moment and, as usual, the price of new cars here astonishes me. You have to bear in mind the prices in the US are stated without tax and delivery, but even so new cars are half to two thirds of UK prices. Even German cars like BMW & Merc are way cheaper.
The other astonishing thing is that used cars are relatively expensive in the US - a 3yr old MB is about the same price in the US as it would be in the UK.
Put the two things together and the cost of ownership is fantatically lower in the US than in the UK. That's the killer for UK owners - buy a new, or even newish car, and you're hosing many thousands over 3yrs. The move to PCP's really rams this home as you get to see the GMFV upfront and then you realise how much the car is losing.
Apparently diesel sales have been badly hit in the US as diesel is currently running some 30% dearer than petrol.
Edited by Bill Payer on 09/05/2008 at 04:56
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I am hoping that prices will come down over the next 6 months as I plan to replace SWMBO 8 year old micra with something similar. So fingers crossed that I can get a good deal at some point.
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I know when I bought my Forester back in March, I was suprised that even though it was more than £1000 cheaper than similar cars for sale on AT, the dealer still willingly knocked £500 off without me even asking, I just said 'right' in that 'im thinking hard about it ' way, it was laughable given the reputation that Subaru dealers seem to have for steep used valuing.
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"I know when I bought my Forester back in March, I was suprised that even though it was more than £1000 cheaper than similar cars for sale on AT, the dealer still willingly knocked £500 off without me even asking, I just said 'right' in that 'im thinking hard about it ' way, it was laughable given the reputation that Subaru dealers seem to have for steep used valuing"
Thats just very very poor salesmanship.
He didnt check his stock with whats was out there on AT world.
Personally I would sack him !
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He didnt check his stock with whats was out there on AT world.
Personally I would sack him !<<
Or maybe they like to turn stock around quickly instead of sitting on it. These days, that would seem wise.
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Or maybe they like to turn stock around quickly instead of sitting on it. These days that would seem wise.
Yep, I agree. I recently bought a Landcruiser from a dealer who priced it realistically - it sold within two days of coming in to him. Others on AT were up to £4k [and more] higher - but had been sitting on their forecourts for 6 months.
Back in January I'd tried to negotiate two of the others down and they weren't having it - they've now reduced the prices slightly but the cars are nearly 6 months older [and still in stock tying up capital whilst depreciating]
Edited by Marlot on 09/05/2008 at 15:14
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I was astonished at the deal my sis-in-law managed to get on the MX-5 she bought back in December from the local main dealer.
Brand new 2.0 Sport at 10% discount, climate control, metallic paint, Bose hi-fi upgrade, mats and Sureguard protection thrown in FOC, AND 3 yrs 0% finance. This was pretty much offered on a plate - very little haggling needed. Worked out at almost £23k worth at list (with all the options), for just over £18k with 3yrs 0% finance. I thought this was a cracking deal, and advised her to go for it.
Interestingly, they had gone in there to look at the 6 week old fully loaded demonstrator with 1,500 miles on the clock which was up for £18,250 but with no 0% option. They nearly fell over when they discovered it was actually cheaper to buy a brand new one!
Cheers
DP
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"I would hope a second hand dealer on here would back me up as they must be finding it very tough at moment they however aren't dumping stock just sitting tight. Hence prices are down becuase a P/ex will take ages to shift"
Yes things are tight, yes we have to work smarter, and correct no one dumping stock YET .....
.... however there is 1 major dealer group who is having a tough time especially with their share price and now being stalked by a property magnet ... I think you will be transporting a lot more of their cars soon.
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>>now being stalked by a property magnet ...
Magnet - are they attracted to each other, or just poles apart?
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"So my question is, to your knowledge have any other dealers main or otherwise gone nuclear and just dumped their existing stock for the best price they can get in order to obtain stock at more realistic valuations? I know it happened in the early nineties, but am wondering about the current position today"
Tell your friend this will be akin to commercial suicide
1 If he dumps his old stock I assume at auction then he will incur auction fee's, transport etc etc.
2 To try and replace all his stock in one go will be impossible especially if hes a prestige german marque.
My solution (which we do on a daily basis) is to price his stock to the current market value. This will ensure the stock rotation he wants and will generate fresh stock in the form of PX's.
Plus will give him "add on" income Finance, Posh Polish etc.
If he works for a large group and hes told to "dump stock" then this is more to do with the cashflow / shareholders etc.
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I don't think things are too bad for the dealers. According to the SMMT:
"April new car registrations were up by 3.2% to 175,668 units, an increase of 5,505 units." Executive car sales were up 37.8% compared with last year - so some people are doing OK!!
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I can't speak for the motor trade but I would be interested to know if the the same dynamics are apparent as we find in our industry. In the fashion business, oddly enough, when trading conditions are tough the balance of power shifts dramatically. When times are good, people are more prepared to experiment with lesser known brands and products which can actually impact negatively on the bigger and traditionally more successful players. When economic belts tighten, the opposite happens with the result that trade buyers and indeed consumers tend to retreat into brands and products which they know and trust. This economic paradox can have the effect of improving the fortunes of the the more established brands despite the overall downturn. The strong get stronger and the weak get weaker.
Wonder if this applies to cars ?
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In relation to shoespy's comment above, I was reading something interesting about how the economic downturn is affecting the London restaurant scene recently.
The budget end of the market is booming as people tighten belts and look to save a few quid.
The very top end of the market is doing just fine, as the Russian oligarchs and various plutocrats who can afford £200-£300 per head for an evening meal haven't even noticed the economic downturn so far, and are doing what they've always done.
The people really suffering are in the middle. The £50-£100 per head places where "ordinary" people will go for a special occasion, or as a treat. These are the people being hardest hit by the downturn, and they are not spending money any more. These places are closing at the rate of 2 a week on average,- apparently.
If the same situation is applied to the car market, we will see sales of prestige motors unaffected, a boom in the sales of small engined, sub £10k cars (helped in no small part by fuel prices and VED changes), and everything else starting to struggle.
I wonder...
Cheers
DP
Edited by DP on 09/05/2008 at 11:34
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"April new car registrations were up by 3.2% to 175,668 units, an increase of 5,505 units." according to the SMMT. >>
I wonder if fleet sales are largely responsoble for this? Some one told me the other day new retail is not good.
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DP .... I think you have done an excellent job of summing up exactly how the motortrade is at the moment
NGE makes a mental note to guy and buy Resteraunt Weekly !!
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That is interesting Eddy and DP. The parallel I can draw from my industry is that budget product with a retail ticket of less than £30 is still selling freely and premium branded product with an item price of over £100 and more is also still doing OK. It's the the middle market which is more difficult. Perhaps it should not be a surprise when we consider that the sector of the community most affected by current conditions is "middle Britain".
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The budget end of the market is booming as people tighten belts and look to save a few quid.
SNIPQUOTE!
This is the whole problem with the restaurant business in the UK, we shouldn't be treating eating out as a special few times a year treat.
If restauranteurs could grasp the fact that if people weren't terrified of the costs and add ons, they could be seeing good levels of business almost every day, rather than Fri/Sat nights and Valentines day/Christmas. The vast majority of the restaurants that are closing are just rubbish and pricey anyway.
Edited by Dynamic Dave on 09/05/2008 at 19:20
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The London restaurant trade is very heavily bolstered by the City in the £50 to 100 price bracket. Without that it would collapse.
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I don't think this has anything to do with the price of oil. I think this has to do with the credit crunch.
- 1 million people are coming off fixed rate mortgages in the next few months, who will see their mortgage payments double.
- 10,000 bankers are being laid off. (And who knows how many more that will be next week.)
This all filters down into the economy, so that everything suffers. toptable.co.uk has better and better offers every week. Two interesting points above:
>>I sell cars generally up to £2500 (sometimes more). I am finding that I am selling my
>>cars reasonably quickly (1-3 weeks) for the price I want. The biggest problem I face is
>>finding replacement stock, because the main dealers are quiet, without a doubt, so the
>>px's are not coming in to feed the food chain.
I posted a thread recently suggesting that prices at the bottom end of the market will rise. Here is the evidence. This poster is going to raise the prices of his cars.
As for OP. What is the point in selling the current tranche of cars at a loss, and then buying cheaper cars in order to make a profit on them. I can provide management consultancy to that company for a very reasonable rate.... :)
Edited by Mapmaker on 09/05/2008 at 18:18
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"What is the point in selling the current tranche of cars at a loss, and then buying cheaper cars in order to make a profit on them"
I think the point was that they could not do anything about the cars they already possess and the situation would only get worse - todays auction report on HJ alluded to this situation.
Conversely, he - my friend - advertises in Glass's guide and has over the last few months started to be contacted by people way out of area and who he has never dealt with before. His opinion is that this is because their usual contacts are not bidding or not bidding competitively. Therefore if he has the cash and is being offered more cars he can be more selective and be tougher on bids.
The main problem his firm cannot overcome is being forced to take loads of new cars that the market cannot absorb at present. The new situation weighs heavy over the whole market.
Finally, the stock dumping tactic was tried successfully by a German sportscar main agent c1994 and it was successful. The other main agents were upset - because they were advertising retail cars for thousands less than their competitors - but prices readjusted to more "realistic" levels shortly afterwards.
Everything sells at a price and as todays HJ report shows and a previous poster said, sellers just need to get their heads around the lower price levels....in my opinion.
Edited by Whitney Paine on 09/05/2008 at 19:50
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I actually think the value of my car has risen since I bought it, I paid £850 for it (R reg Fiesta 1.3 Ghia FSH and 12 months ticket) in August.
However just over £100 a year to tax, gets 40mpg and still has most the modern luxery features such as electric windows/power steering.
I suppose it is like smaller cars have always held their value a lot better than bigger ones.
I feel sorry for anybody trying to sell something like a Mondeo it is going to be hard to shift in this climate. My mate has a 2001 206 2.0 GTI, I reckon the value of that is going to plumet this year. High road tax, high fuel costs, high insurance costs although he only paid £4500 when it was 3 years old for that very reason!
I have also noticed a lot more petrol taxis about lately, seen quite a few petrol Astra's and Focuses.
Any post 2001 car with high emissions is going to be very hard to sell due to the new tax rules.
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