What Will 2010 Bring For New Car Sales?
In October and November the new car market recorded record year on year rises in New Car sales in the UK. So, we all should be really happy, shouldn’t we?
All seems superficially rosy, yet Digital Acumen is predicting a tough year for Franchised Car Dealers in 2010. Here are some good reasons why…
The Context of 2008
Firstly, late 2008 was the weakest final quarter for sales for many years, so comparing year on year is rather like comparing the next Atlantic crossing after the Titanic.
If car sales were the same or worse than 2008, then it would have been catastrophic for all those dealers who struggled through much of 2008 and early 2009.
The Tailing Off of the Scrappage Scheme
The scrappage scheme which has, on the face of it, single-handedly resuscitated the UK car market has mostly passed. Not just because the government has merely topped it up, but also because there aren’t many people left with bangers who can afford to trade them in for new cars.
If nothing replaces Scrappage, then 2010 will go swiftly downhill.
New Car Price Rises Continuing
Running a new cars website as we do, it has been clear that even from January 2009 car prices have been going upwards. With a further suite of price increases due in 2010, the average rise has now reached four figures. This more than compensates for the scrappage scheme – it was as if manufacturers knew it was going to happen…
With most cars more than £1,000 up on last years’ prices, they are even less affordable.
The VAT Increase Returns
From January 2010 VAT goes back up to 17.5%. The addition, whilst not meaning much on smaller purchases, means a lot when it comes to a car. This pushes the cost up further for the motorist wanting to buy a new car.
The NET price of a car in 2010 will be 2.5% more expensive to the consumer even if the pre-VAT price is not increased.
Supply is Increasing, Demand Will Fall
In mid-2009 there was a strange situation. Manufacturers who had shut down, or slowed production to a crawl because of the predicted doom of 2009 were having to respond reactively to the effect of the Scrappage scheme.
They had a situation of strong demand and no products. Lead times were getting longer for delivery (up to six months on certain models like the Ford Fiesta, Fiat 500 and Hyundai i10), particularly on smaller cars.
This has now started to change, with demand tailing off, supply catching up and with a weak start to 2010 predicted – suddenly there will be oversupply again.
The Economy is Still Fragile
We are still officially in recession and, even if we are out of it early into the new year, we still face a very uncertain 2010. Even the optimists are scratching around for the green shoots of alleged recovery.
The economy is not going to drive increased car sales.
So, bearing all this in mind, we predict a tough 2010 – unless Peter Mandleson comes up with something creative and dramatic… which he probably won’t. It’s going to be a tough time for all in the trade…
Sphere: Related ContentMotorists to be Hit With VAT Increase on New Cars
Car buyers who don’t order their new cars in the next couple of weeks will be hundreds of pounds worse off as they sleepwalk into the VAT increase.
With average delivery times stretching to two months, new cars that are not ordered within weeks are likely to be handed over and paid for after the new year VAT increase, needlessly costing their buyers quite large sums.
The much-heralded Scrappage Scheme, though extended, is not expected to last much into the new year, either.
Tim Wait, Director of CarQuake, the UK’s foremost new car website, comments: “At the moment, thousands of new car buyers are walking blindly into substantial losses. On a £20,000 car, the January change in VAT alone could easily be worth a the equivalent of alloy wheels, front and rear parking sensors or metallic paint finish, while the end of Scrappage could make a substantial difference to the type of car they can afford. And all they have to do is buy now, to avoid paying later.”
‘Buy Now, Don’t Pay Later’
On January 1, 2010, VAT is to be restored to 17.5%, with the biggest impact on high ticket purchases such as new cars. On average, the VAT change will push up the price of a £20,000 car by around £500.
“Many new car buyers don’t realise how important timing is,” continues CarQuake’s Tim Wait. “If you order a car in December and it’s delivered in January, you’re likely to be making your main payment in January – whether it’s cash or on credit. And therefore you pay January’s VAT. And the time to avoid that scenario is now.”
Buying now can still also be best advice in general car pricing. Wait adds: “Retailers have been faced with downward pressure on prices: survival means they’re now much more competitive. But manufacturers are pushing prices up. And as Scrappage comes to an end, the new year won’t just see higher VAT but also higher retail prices.”
Speaking for the consumer, Tim is quick to point out that there are some very good reasons to buy a new car in the next 4-6 weeks…
- Only 15% VAT to pay if you buy your new car before the end of 2009
- Strong second hand market for used cars, ensuring that you get a good part exchange price
- The opportunity (where appropriate) to participate in the government Scrappage scheme which has been extended for a further 100,000 vehicles but is likely to run out by the end of the year
- The possibility of avoiding manufacturers’ 2010 price increases
He concludes: “Based on our experience, we recommend that consumers act while market conditions are so favourable, a condition that only has a few more weeks to run. The future promises higher car prices, higher interest rates and higher VAT. Our advice is definitely: Buy Now – Don’t Pay Later.”
Sphere: Related ContentWhy CarQuake Matters – The Story of a Car Purchase…
Though most think that CarQuake is all about the price, something we pride ourselves in is the service offered by our dealers. When we claim that we offer the easiest way to buy a new car, what we mean by this is both a good price AND a good service. Recently, one of our staff put this to the test.
What We Were Looking For
The target car was a Ford S-Max Titanium. The detail of the spec was to come out of the conversations, but we decided to try the ‘traditional’ routes to market as well as the new ones… and here’s how they got on…
Sphere: Related ContentCar Scrappage Scheme… The Real Story??
Is It Working?
Being at the sharp end of new car sales, we have been watching the unfolding scrappage scheme with interest. The ‘PR’ is that the scrappage scheme is brilliant for all concerned but, from what we can tell, it is hardly that, is tailing off rapidly and both customers and dealers are not getting the deals they expected.
Does it Help Dealers?
The overall answer to this seems to be ‘no’. Why not?
- The administration time for these sales, both in negotiation as well as transaction, is much higher than for other sales
- The deals are not as straightforward, because there is blurring of where the discount can be applied, and where not, and to what extent the full £2,000 can be claimed
- The profit margin for these sales is negligible, and on top of that some manufacturers are not giving bonuses to such sales, or inflating sales targets in this difficult marketplace
- Furthermore, the vast bulk of sales are on the smallest cars, so it is more about the cheapest possible new car purchases, not helping with the range of cars that a dealer needs
- 25% of dealers have reported no change in footfall and sales – so it’s not the silver bullet that all were hoping for
- It is not really a ‘green’ measure as evidence still is that the best you can do is to hold on to your car and delay your purchase. The manufacturer of a new car is very carbon-intensive, far outweighing the emissions benefits. Not to mention the environmental ‘cost’ of scrapping your car
Does it Help Customers?
If you are a customer looking for a new car and have a scrappage car available to you, then we recommend that you choose the franchise very carefully. The stats from the AM-Online website are very revealing as the car makes which are outperforming the market are also the ones being as straightforward as possible with you. Manufacturers like: Chevrolet, Kia, Hyundai, Skoda and Toyota are the ones benefiting. Others, who we won’t name, but who are not really offering the full discount, or forcing the buyer into certain models of car whose MRRP have mysteriously increased over the last few months, are not benefiting.
If you are a customer just looking for a new car, then we hope that the dealer has enough time to deal with your custom as they are currently snowed under with unprofitable and time-consuming management of these scrappage offers.
So, What Is the Verdict?
Our verdict, given that all manufacturers have been raising prices across the board over the last four months by between £500 and £1,500 it seems this ‘deal’ is not all it has been cracked up to be. In fact, net, the consumer is worse off as a result of all this.
Furthermore, whilst 30,000 sounds like an impressive figure, this is from launch (over two months ago) and is the total sales figure for the entire country. Interest is already tailing off, and we expect that this scheme will slowly fade away, with dealers being left in the same position of trying to sail through difficult waters…
As always, we can help. Call 0845 680 3100 to speak to us about how we can help dealers promote themselves online.
PageRank In the Automotive World…
It’s one of those things that you watch and, whilst it doesn’t mean absolute success or failure, it’s rather like a barometer or a thermometer – it is a measure of popularity.
We often get asked ‘how do people find CarQuake’ and whilst we can point them to searches like Best Car Deals, New Cars for Sale and Cheap New Cars as indications of good search engine performance… it’s still not enough.
So, Where Do We Stand?
Well, just another observation to add to the mix – CarQuake is now Page Rank 6. Whilst this doesn’t mean anything in terms of business performance it is a testament to where we’ve got to that when comparing with much ‘bigger’ brands, we hold our own nicely…
Page Rank 6 (same as CarQuake): Autotrader, Yahoo! Cars, Top Gear
Page Rank 5 (lower than CarQuake): Exchange and Mart, Autoquake, Moneysupermarket
Page Rank 4 (considerably lower than CarQuake): Broadspeed
Page Rank 3 (very low): UK Car Discount
We’ve even got a higher ranking than some of the Manufacturers (we won’t mention any names!).
To be fair, we still have a long way to go… but the signs are very encouraging.
keep looking »