The effects of significantly reduced new car sales over the last 24 months will have long reaching implications for the automotive business. Industry experts are forecasting a shortage of used car stock (mainly de-fleeted corporate vehicles) after March 2011 as a consequence of up to 40% reduction in new car sales 3 years earlier.
Historic new car sales effect the availability of good quality used cars and their prices. If supply reduces then prices are likely to hold firm or even increase provided demand remains the same, but by the time 2011 comes around there may well be other factors to take into consideration.
Firstly motor manufacturers don’t get rich out of the sale of used cars as these are dealer and economy driven and therefore the manufacturers will be looking to force new cars into the market in the face of used car shortages. If the market for new cars isn’t strong enough then this is likely to be achieved by enhanced consumer offers with greater discounts thereby narrowing the gap between the cost of buying a new or used car.
Equally manufacturers may be able to make new car offerings even more attractive by controlling the availability of “affordable payment” finance offers providing interest free credit or highly competitive PCP monthly payments for example, making the new car proposition even more attractive.
One of the main areas of focus for many manufacturers over the next 12 months will be the fleet market as this is seen as a quick fix for new car sales. Traditionally fleet programmes have been based around an average replacement cycle of circa 36 months, but in uncertain times manufacturers have previously sought to introduce exceptional 6 – 18 month deals supported by guaranteed residuals and cheap finance rates, “deals too good to miss” for the likes of daily rental companies which may accelerate the availability of high quality, late used cars which will influence the used car supply chain.
So what conclusions can be reached? Well, good late used cars may become scarcer but simply assuming that prices of used cars will rise is potentially dangerous. It is more likely that during a period of relatively slow economic growth (if any), new car prices will start to reduce via a number of different mechanisms, as is happening right now and that this will serve to cap the overall prices achieved for used cars going forward. The other major factor influencing new car sales is the VAT which is set to rise to 20% from January 2011, increasing new car prices across the board.
One thing is for sure – now is the time to buy a new car. Buying before 31st December 2010 will ensure great new car discounts as well as a guaranteed 2.5% saving on VAT – wait til 2011 and it will be a very different story!
For many car dealers, one of the sea-changes of the last ten years or so is the emergence of the Internet Car Buyer… not just the one who researches online, but the one who goes on to fulfil and complete on a sale, often without visiting the showroom.
Of course, it’s been said that there aren’t many buyers like this, but you only have to look at the evidence presented to dealers – both in terms of sales into and out of territory, as well as the growth in numbers of online suppliers – to realise that whilst the overall level of interest in new cars is arguably declining, the online car buyer is on the increase.
With CarQuake at the cutting edge of online car buying: being the UK site with the most efficient means of buying a new car.
We see both ends of the spectrum – from the car buyer who wants a smooth and easy path to a new car to the dealer who wants to take more control over their marketing.
The Path to Profit – for Dealer and Customer
The place where we can see most dealers ‘drop the ball’ is not necessarily in the marketing, but in the sales process. There are two main reasons for this:
- Dealerships are not immediately set up for and compatible with distance selling
- Dealerships aren’t managing the customers in the right ways to ensure satisfaction
So, in order to help dealers serve customers better – both for their benefit and for the benefit of future buyers – we have prepared a report offering a detailed look at the Internet Car Buyer and how best to serve them and gain additional sales business.
What’s in the Report
In our report, we will offer some detailed research and case-studies on:
- Why timing is crucial to the sales process
- What you must say on first contact
- Quality of enquiry is paramount
- How to offer the best deal
- Why part exchange is an opportunity
- Why efficiency must balance effort
So, if you’re a franchised dealership and you want to take advantage of this exclusive report, then please contact us. And just ask for the ‘Car Buyer Report’ in the message field… and we’ll send you this report and keep you informed of any other key developments in the field of Internet Car Buying.
We keep an eye on the latest trends in motoring and there is little doubt that the one sector which will grow is the electric car.
This does not include just the full-electric cars, which will in the end, dominate this area… but also the hybrids, of which the Toyota and Lexus ranges lead the way.
Turning Over a New Leaf?
We’re also really excited that the UK, though not owning any volume automotive brand, seems to be maintaining leadership in technology, and is where Nissan have decided to produce their new Leaf electric car.
Niche or Volume? Is it in the Price?
Still, whilst all the hype is going on leading up to the launch of this car, and others for that matter, there are a couple of burning unanswered questions…
1. Will the general public see a substantial cost benefit to choosing electric? Or will it still be down to personal ethical choice?
2. Will the £5,000 support the UK government is putting behind these vehicles go into the consumer or the manufacturer pocket?
It is our view that the kind of price-point these cars seem to be pitched at seem to be substantially greater than the cost-savings over even the medium term, and this coupled with the other key disadvantages including shorter range and less storage.
As for who is going to benefit from the support of the government, the observation from Nissan was revealing: they defended the price-point of the Nissan Leaf saying that it was competitively priced against the Prius and other hybrids.
This, however begged the question – so where is the £5,000 from the government accounted for? It seems that when it comes to price – this is defined by competition and not incentives.
With the added threat of leasing of batteries whilst buying the car (with no-one offering a view what happens when the batteries are taken back out of a Leaf)… it seems that Nissan are definitely not going to be swayed by making it cost-effective in comparison to existing cars.
Will the Leaf Succeed?
And finally, we turn to whether it will be a success… We believe this will be defined not by the product, but the marketplace it comes to. If the market is improving, but with still rising fuel prices then it’s got a great chance, but if the market is still uncertain, then it is a lot of money, even for a no-emmission car.
Then Nissan can always take another look at their pricing… of course! This may happen anyway as many manufacturers are testing and announcing electric cars. Competition is always good for the new car buyer.
Recall, Which Recall?
When it comes to vehicle recalls Toyota apparently have dominated the headlines in the early part of 2010. What is less apparent is that recalls are far from unusual in the motor industry with manufacturers regularly carrying out recall work on vehicles in the national vehicle parc.
Most of these are kept low key and under the radar of the consumer and the press despite the fact that there are 439 recorded recalls with VOSA (Vehicle and Operator Services Agency) during 2009 alone.
What did Toyota do Wrong?
So why did the Toyota story hit the headlines? Well firstly Toyota have for many years enjoyed excellent Customer Satisfaction results setting an enviably high standard that many others aspire to emulate. Secondly the issues relating to the Prius are accentuated by virtue of the phenomenal success of the Prius model range as the industry leading hybrid vehicle. In many ways Toyota could therefore be considered victims of their own success as they have set the bar extremely high.
Are Automotive Recalls Avoidable?
The fact is whether we like it or not, recalls are inevitable – manufacturers are always developing new features which have enormous consumer appeal in direct response to consumer demand, and in the case of Prius features which serve to accelerate valuable industry progress towards fuel efficiency and low emissions. The rush to get these new products to market may not be always prove a successful long term strategy. However, testing every part for a lifetime wear is a near-on impossible task.
That said what is important now is how Toyota, and every other manufacturer deal with their recalls going forward as they will be measured on their actions – their commitment to, and delivery of, the overall customer experience as well as the underlying product problem. This is an area where well known and trusted brands will either suffer great damage or live to fight another day.
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…
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.”
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…
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.
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.
As a marketing supplier to a number of franchised car dealers, as well as the operator of the hugely successful new car sales website ‘CarQuake’ – we’ve compiled our ‘top 5′ mistakes that Car Dealers make in their websites.
1. They Focus Too Much on ‘Cheap’
There is a large difference between ‘cheap’ and ‘value’ – and it’s not just in the semantics. It’s the difference between getting the appropriate quality and not noticing what quality is. You can tell when a dealer has a cheap website… because there’s no attention to detail, getting around the website is a chore and finding offers is practically impossible.
2. They Don’t Measure Their Website Visitors
With the Internet, there is no excuse – you have no reason not to know what traffic is coming in, and what visitors are doing on your site. After all, a good car dealer pays full attention to anyone who steps on their premises… so why should your website be different.
3. They Focus on Marketing Spend, Not Yield
Don’t fix a marketing budget – because you can be sure that whoever operates it for you, internally or externally, will just spend it. Set a spend per sale, and then aim at this… you’ll be surprised how your profitability increases, and whoever runs your spend for you will also be called to account.
4. They Ignore Server Speed
This is easily missed. Most dealer websites we test are slow… too slow. This not only affects your website visitors (and tests their patience), but if you are running Adwords campaigns, it means you are also downgraded for this too.
5. They Don’t Optimise Their Site
Most dealer sites are barely optimised for Search Engines, which is absurd given that, apart from the manufacturer, dealers are in the best position to take advantage of optimisation. Furthermore, dealers don’t even optimise the conversion paths for site visitors – often the offers are a dead end… and the visitor leaves the site without ever enquiring! A website is an ongoing 24/7/7/31/365 process.
… Don’t Get Left Behind…
If you would like us to give you a FREE telephone appraisal of your dealer website and offer you a few pointers on how you can improve your website – then contact us, or call 0845 680 3100 and put a bit of dynamism into your website! We can tell you:
- What the key problems are with your current site
- What you need to do to address them
- How you can generate more business online
- How you can become a proactive, successful, online dealer
So, don’t despair, it’s not to late to turn this around.keep looking »