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Playing with the numbers; Yes, car sales are up – but that’s far from the whole storyBack

CarProdMonthly sales figures from the Society of Motor Manufacturers and Traders give the impression of an industry in the rudest of health. June 2015 marked the 40th consecutive month of growth, with sales up by seven per cent in the first six months. In fact, the 1,376,889 new cars sold up until July beats the first six months of 2004 as the best ever half-year for new car sales in the UK.

These figures don’t record how many cars have been registered to dealerships rather than customers, but I’ve been told it could be in the region of 400,000. There is nothing new about these tactical, pre- or self-registrations. What is new is how the number is growing.

The car makers appear trapped on a merry-go-round of their own making. Sales have been growing for so long that any manufacturer that steps off and puts a stop to it will be perceived as failing.

With a finite pool of customers, the result is that dealers are having to meet manufacturers’ targets by buying the cars themselves. These pre-registrations enable them to trouser the bonus for hitting the manufacturer target, which allows them to sell the car for a knockdown price without losing money. This arrangement has proved successful so far. However, sources tell me that dealers are starting to struggle with cash flow. This is because in order to pre-register a car, the dealers must pay for it themselves. And they must sit on those cars for 90 days – the amount of time legislation dictates they must wait before selling them.

Sue Robinson, director of the National Franchised Dealers Association (NFDA), told me: “Everyone knows manufacturers are pushing the market through the use of targets and incentives, but it’s getting to an unacceptable level. Our market has been good. Following the recession there has been pent-up demand and there have been plenty of competitive finance offers, so we’ve had a boom. But it has to start levelling off soon. It’s becoming unwieldy and, from an economic point of view, it’s distorting the market. I’ve written to a number of car manufacturers on behalf of the NFDA saying: ‘This has gone too far, how do we stop it?’ ” If dealers have unsold stock registered in the first quarter of the year, these cars will become bargains for the savvy buyer who is flexible on when their “new” car was registered. Those buyers must also accept that they’ll be the second owner on the V5C. But, even so, you can’t argue with a Volvo XC60 D4 R Design Lux Nav with a handful of miles for £30,750. The list price is £37,155. I also found a Mercedes-Benz C250 Bluetec Sport, again with delivery mileage, for £23,250. The list price is £27,695.

As well as small dealers, which don’t have the clout to pre-register large numbers of cars, used car sellers are also struggling. On a popular new and used car website, I found a brand new 2015 Golf 1.4TSI for £19,150. In near enough identical spec was a 2014 version with the same engine but on a 64 plate and with 5,000 miles. It was £345 more expensive. I know which one I’d rather have.

We shouldn’t complain – but we should be wary of the sustainability of an industry whose perceived success appears based on smoke and mirrors.

Source: The Daily Telegraph

Posted by Sue Robinson on 24/07/2015