Stock shortages face dealers next year, warn experts

Glass’s is urging more franchised car dealers to sell vehicles that have higher mileages and are more than three years old in order to combat the anticipated dramatic reduction in used car supply over the next 12 months. The company says that by 2011 there will be around two million fewer used cars aged between one and five years in general use compared to 2008. “In 2008 over 60 per cent of franchised dealer stock consisted of cars less than two years old, and yet this year alone there could be as many as 600,000 fewer one- and two-year-old cars available for dealers to retail,” explains Adrian Rushmore, Managing Editor at Glass’s. Rushmore says the falls in used car supply are the product of two trends – each month of low registrations has produced a proportionally lower number of part exchanges, and the prolonged period of low registrations has meant the parc of younger used cars has also steadily diminished. Franchised dealers are particularly vulnerable, says Rushmore. “Many are handicapped by the constraints imposed by strict standards relating to vehicle condition, laid down by approved-used programmes. We acknowledge that some manufacturers have relaxed and broadened these standards, but more still needs to be done. “There are various initiatives that could be undertaken, the most obvious being the introduction onto the forecourt of older vehicles and those with higher mileages. This could be embraced into a two-tier system that allows for less-exacting standards of preparation for older examples. That would ensure preparation costs do not rise to the point where retail prices become unrealistically high. Costs could also be better controlled with lower hourly workshop rates for older cars, and the wider use of non-OEM and reconditioned parts.
“The very nature of three to five year old cars is that each one is more likely to be very individual in terms of mileage, specification and colour. As a result, this retail stock is less price-sensitive and profit margins should, therefore, be better protected.”	Plans have been announced for this year’s Bangers 4 BEN challenge- a drive to Monaco and back in £500 cars. The theme is ‘luxury’ and a handful of places remain for the event. Entry costs £500 per team, which includes ferry transport, breakfast and evening meals and accommodation. Teams must source their own banger and show an invoice for under £500. James Baggott, Car Dealer’s editor said, “Our last Bangers 4 BEN was such a great event for all involved we felt we just had to do it again and try to raise even more for our industry charity. We’ve decided on the theme of luxury to give teams a chance to really show what they are made of and a better chance of making it to the destination!” Charles Davis, BEN’s Director of Fundraising and Communications said,“The last Bangers 4 BEN event was a great success and this challenge is going to be bigger and better than ever. This is a fantastically fun event and we hope that the industry will really get behind it and have a great time raising money for their charity.” Enter at http://www.ben.org.uk/Bangers4BEN
Competition for stock is going to intensify, warns Rushmore. “It will be important to nurture those fleet contacts and ask for first refusal when cars are changed. Also, a dealer’s own database of customers could be a valuable source of used cars. It would be far easier to gain the attention of a customer if the telephone conversation started ‘Would you consider selling your car?’ rather than, ‘Would you be interested in buying a car?’” As choice becomes more limited in the coming years there will also be a greater need for dealers to buy cars that require additional reconditioning work.
In addition, the ‘right’ car may present itself at a time when retail sales are experiencing a lull or when stocks are high. In these circumstances the correct decision could well be still to make the purchase, even if the stock-holding period is likely to be less palatable for most dealers. This will make appraisal and valuation even more important. Despite the reductions in used car availability, there is unlikely to be a dramatic rise in prices in the foreseeable future. “Despite the shortages, we should not get the idea that the market will be in a frenzied state of excitement in the next few years,” adds Rushmore. “There will still be the normal highs and lows and, whilst prices will edge upwards when viewed on an annual basis, there will be no repeat of the unprecedented rises we saw last year.”