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As UK car registrations reach 39 consecutive months of growth, it is inevitable that many people in the retail motor industry are questioning whether this represents true vehicle sales, or whether the market is being boosted by pre-registrations.
Pre-registration is nothing new and has been part of the motor trade for years. The issue though is the scale of pre-registration.
A few vehicles to help a dealer meet targets is fine as these can be easily absorbed by the market. Dealers or manufacturers register cars to themselves to boost sales figures and meet targets. These delivery-mileage cars are then sold on well below list price. However, the problem arises when pre-registering becomes widespread and usually leads to the market being flooded with a large numbers of cars left unsold as there are not enough buyers for them.
In turn this can damage the new car sales market as pre-registered vehicles are usually cheaper to buy than new ones. This happened in the late 1990’s and led to the industry campaigning for legislation culminating the New Cars Order 2000.
The New Cars Order 2000 was introduced by the Office of Fair Trading (OFT) to reduce the number of pre-reg cars coming on to the market. It stated that cars should be retained by the dealer for a minimum of three months after registration. The legislation was an attempt to reduce the incentive to pre-register, as the vehicles would have to be kept and funded by the dealer and could not be sold immediately to reimburse dealer outlay.
Most manufacturers do not care if the cars have been sold to a customer or if they are still sitting in the compound having only been through a paperwork registration exercise. As long as the car has been registered with the DVLA it is considered as being sold; the dealer then has to pay for it and it is no longer the manufacturer’s stoc
However, there were some concerning comments this week at the Car Dealer Conference where some manufacturers denied that they were aware of pre-registration, or that there was a problem developing in the market. As a trade association representing franchised dealers we were extremely surprised by this response when we know that they way manufacturers target dealers actively leads to pre-registration.