Thursday, 26 March 2009

Recently customers have been making offers way below the advertised price for my vehicles and when i politely decline it (depending how the offer was Worded) they invariably say "its a buyers market " but the thing is its not a buyers market now, as of today i have only got 1 car on my website that is unsold, and i cant replace the stock i have sold.

There is a shortage of good clean used cars and in my opinion this has been brought about by new car sales grinding to a halt and therefor the main dealers don't have as many part exchanges to offer to the trade, the laws of supply and demand have kicked in and this has meant that the used car traders have had to pay more for stock or look for alternative suppliers, vehicles are actually changing hands at auction for more than we were retailing them for just a couple of months ago.

There is only a certain amount you can ask for vehicles before you price them out of the market, and the used car trade is in danger of meltdown if this continues to happen, a lot of vehicles went up in Glass's guide last month and will probably do so again this month this is virtually unheard of, for example i was offered a BMW X5 the other day which which a few months ago would have been worth about £1500 to £2000 behind guide trade price, but now the trader is asking for £2000 over trade price which in fact is probably retail guide price, an it amounts to an increase in price of over 25%.

As i said earlier there is only so much you can ask for a car, Once i ahve purchased the vehicle I still have cleaning, reconditioning, advertising, warranty and my wages to take into account, the only way myself and the rest of the trade who are still managing to make a living selling used vehicles is to reduce profit margins, unfortunately this means that there is no room for over allowance on a part exchange and certainly no big discounts to be had when there's no trade in, the re runs of the TV programmes which were first aired 2 or 3 years ago where the knowledgeable advisor gets the customer an unbelievable discount have gone.

I need more stock and i cant buy it at the moment, mostly because i am not prepared to pay over the odds and then pass on the costs to my customers who atwould end up losing a fortune when they trade it in, or having a negative equity situation and being stuck with the car.

I am a one man operation and i have been in the motor trade over 30 years i have worked for volume dealerships Vauxhall, Ford and Peugeot and Prestige dealers BMW, Audi and Mercedes Benz, i have lived through the good times and the recessions i can even remember the drastic effect the petrol crisis had on car sales many years ago, drawing on my previous experiences i remain competitive because i keep my costs as low as possible while still providing a service which is comparable to much larger dealerships.

For the first time in my sales career i feel sorry for the big dealers and Used Car Supermarkets who have massive overheads, every car you buy from them is priced to pay for the overheads i have plus, the General Manager, Sales Manager, And Salesman all get their cut, an added expense at Franchised Dealer is their own workshops some who charge in excess of £100 an hour check and service all the sales vehicles, whilst i admit that they do prepare them to a high standard, they also carryout some repairs which i would say at best could be called precautionary and at worst totally unnecessary, Service Managers And Parts Managers are paid on commission too, Labour hours sold, and parts sold, mechanics are paid on bonus too, in my management days i was always amazed at just how much more reconditioning my sales stock needed when the workshops were quiet.

A lot of the bigger dealers operate a strict 90 day trade policy, in fact its so strict that when i went for an interview at one of the dealers for the position of Used Car Sales Manager i was told "if a car is still here after 90 days, you WONT be!" If these dealers continue to buy vehicles at inflated prices, then have them prepped in their workshops, only to find that they have to dispose of them in the trade in a few months when prices have returned to normal they will suffer huge losses and i am not sure the majority have the necessary capital to recover.

The finance companies now have a tremendously difficult job to do, used car prices are going through the roof, so what are their underwriters going to do? will they start asking for 40 to 50% deposits to try and make sure that the customer will stay ahead of the depreciation and still have equity in the vehicle when the bubble bursts, or will they carry on lending and take the chance that the Finance Companies will suffer massive losses if the car is repossessed and disposed of at auction.

A recent example of how you can be caught out was from a lady who had seen that i was advertising a Range Rover in Autotrader and rang me to ask if i wanted to buy hers, as it happened 1 was enough for me, but i rang round the traders i know and contacted her with what i considered to be a good offer from one of them, Range Rovers were depreciating at a substantial amount every month and she told me that she had put £10000 deposit down on the vehicle she had only had it a short while and it would seem that if she accepted the bid she would be faced with a deficit of £2000 just to pay off the remaining finance and then she wouldnt be able to afford another vehicle.

And finally what will happen if and when the government bail out the Car Makers, at the moment there are fields and hangers full of unregisterd vehicles which will have to be disposed of before the manufacturing process starts again, when there has been an over supply in the past the manufacturers resort to special offers to move the metal, Subsidised Finance Rates, Conquest bonuses, Free Insurance, Registration Bonuses, Free Servicing, Etc, Etc and this has a direct and immedate knock on effect to used car residual values

Well anyway these are my thoughts in the present economic trading climate, I may be right i may be wrong but the moral of the story is please don't say to me "Thats my last offer Mate, Its a buyers market take it or leave it" because it isn't and i will leave it thank you!

Usually rules apply, please excuse the grammar, spelling, content, and punctuation because i know its not perfect but you get the gist and if i had paid attention at school when i should have done i wouldnt be stuck selling cars for a living!

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