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Two thirds of dealers hit by down-turn
publication date: Dec 20, 2008
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author/source: Robin Roberts
| New research conducted by Manheim Retail Services
during December 2008 has revealed the true impact of the recession on
dealers’ used car sales. | Questioning a broad cross-section of mixed franchise
retail dealers who use the services of Manheim subsidiary Portfolio,
the survey found that more than two thirds of all dealers had
experienced downturn in used car activity during 2008.
The vast majority of these said that levels were down by over
10pc. On the positive side, nearly a quarter confirmed that sales had
remained at the same level this year, with a further 12pc saying they
had seen used car sales actually rise.
Reflecting the current economic difficulties, the results also
showed that dealers were either unable or reluctant to invest in used
car stock with more than half confirming that they had reduced their
stock levels. Conversely, an indication of how some dealers are
approaching used car activity was that more than a quarter said they
had maintained the same levels of retail stock, whilst 20pc of those
questioned said that had actually invested in more stock for the
forecourt.
Further detailed investigation revealed that dealers had been
actively changing the profile of retail stock.
Tellingly, three
quarters of dealers said they had adopted policies of lowering the
average value of vehicles on display, with 46pc confirming that they
had reduced stocks of larger fuel-hungry Executive cars and 37pc said
they were shying away from 4x4s.
Not surprisingly, the survey
revealed that 63pc of dealers were stocking more super-minis and small
hatchbacks whist 29pc also confirmed that they had increased their
stocks of medium-family cars.
Turning to the marketing and promotion of used cars, Manheim Retail
Services said the results showed that dealers seemed to be taking
differing approaches to tackling the tough trading conditions.
As
expected, a sizeable proportion - 38pc - said that they had tightened
their belts in 2008 and reduced their used car marketing spend.
| | The Finance and Leasing Association’s Specialist
Automotive Finance initiative has been designed to help motor
dealerships through the current economic conditions.
SAF was introduced to improve skills surrounding the sale of
motor finance in car showrooms. After its first full year of operation,
5,800 dealers and finance company representatives have registered for
the FLA’s online SAF competence test.
Good finance knowledge is more important than ever in a
downturn - FLA statistics show that 52.9 per cent of new cars bought by
consumers are now bought using dealer finance. This is up from 46.4 per
cent a year ago. As consumers turn to their local dealership for
finance it is vital that they are offered a deal which suits their
needs.
The SAF test has been designed to be retaken annually to
ensure candidates remain abreast of the latest industry changes. Users
whose tests have expired must retake the test now to ensure they
benefit from the updated SAF reference material.
The reference material, which helps individuals prepare for
the test, has been updated to reflect the regulatory changes including
amendments to the Consumer Credit Act. The reference material is an
invaluable tool for dealership staff involved in the sale of finance.
Paul
Harrison, Head of Motor Finance at the FLA, said, “The improved
professional standards provided by SAF will help make sure consumers
are given the most appropriate information available. Raising consumer
awareness of the finance options in the showroom, and their benefits,
could make a big difference for dealers in current market conditions. I
would urge dealers to take full advantage of our free of charge test.” | On the
other hand, a third confirmed that they saw used cars as a life blood
to their dealerships and had increased the marketing spend by up to
10pc, with a further 4pc saying it was up by over 10pc.
Looking at marketing strategies in 2009, the survey clearly showed
that dealers are very focussed on the best ways of generating retail
interest. Bad news here for newspaper advertising with 63pc of dealers
indicating they intended to reduce advertising in this media channel
with 26pc confirming that they would be cutting back on local radio and
TV advertising.
Over two thirds of all dealers questioned reported that they
would invest more in online promotion and a further 46pc were positive
about increasing direct marketing spend on used cars.
John Simpson, Managing Director of Manheim Retail Services said,
“The survey confirms pretty much what we felt was happening but it’s
good to see it crystallised so clearly. Perhaps the most interesting
insight of all is that dealers seemed to be split in their strategic
approach to used car retailing.
“Many are doing what seems natural
in hard times and cutting back where they can and yet others are taking
a more aggressive stance. These dealers are investing more in a market
where there is still healthy demand and certainly profits to be made,
providing stocks, values and customers are managed very carefully.”
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