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), that 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!

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.

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…

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.”

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.

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.

So, it’s happened in September following a pretty miserable August… we get the feeling it’s going to be a long winter with March months away and little evidence that anything will change soon in the marketplace.

At least some of the car manufacturers are trying to slow down production, but even then the gap between the real market and what they would like it to be still seems to be too wide.

So, how can we help?

Well… firstly CarQuake is still open for business. Very much so.  Having launched in September 2006, it has steadily grown to the point that it has become a destination site for many new car buyers. Yes, they are still out there, but are probably more price-conscious than ever. And dealers, yes, franchised dealers are still benefiting from using the easiest way to sell a new car – because customers find it the easiest way to buy – no nonsense, just great deals!

Secondly, Approved Used Cars is here… because when the new market is tough, then the second hand market needs to perform… and here is a site which, at last, will provide all franchised dealers a proper route to market – as it educates the customer fully on all the benefits of buying approved used cars… rather than lumping approved in with ‘trade’ and hoping that no-one will notice (and then charging you through the nose for doing so).

Rumour has it, too, that Approved Used Cars has a free trial on the go… so sign up and give it a go – before the trial expires.

It may be a tough time, but we are genuinely here to help!

A recent study by trading standards in January in Warwickshire estimated that 27% of used cars available for sale were unroadworthy.

However, that is nothing compared to a Hertfordshire report in June… five in eight used cars sold were unsafe.

And, yet, these were cars available on traders’ forecourts. Not online, but in a place where it was expected that they would have been properly checked.

So, What do we Think is Driving This?

On reflection, there are two elements we believe drive this:

1. Traders see low priced used cars as unworthy of proper scrutiny because there’s not much margin in them – so they take cars on spec and hope to shift them with minimum effort
2. The squeeze on the consumers’ pocket is also affecting what a car can be priced at, lowering margins and again taking profit out of the car

What’s the Solution?

It is our view that the benefits of buying Approved Used Cars as opposed to purchasing from Traders is the only way in which a customer can have confidence in their purchase – both in terms of the way in which the car has been checked and prepared as well as the backup of the manufacturer when things go wrong.

Sure they cost a little more, but they’ll last far beyond the 2nd, 3rd, 4th and so on car bought privately or through traders. Trust and quality go hand in hand!

The Right Experience

The internet car buyer is no different to any other online customer. They expect a professional, secure, smooth transaction and some kind of incentive for taking this route to purchase. Brands who recognise this end up not only benefiting from passing on the increased efficiency of the internet, but also end up with very satisfied customers – CarQuake’s CSI ratings are far higher for our dealers than through any other source of business.

The Real Deal

Online customers also expect a proper offer and therefore ‘deal’ for their enquiry. After all, they are not choosing to take the high ticket and overhead route… they just want a decent price and not to be messed around. All other consumer products have better offers online than on the high street – why should cars be different?

So, Where Does Brand Loyalty Fit?

Recent research shows there isn’t much loyalty and, if anything, it’s decreasing. All the more rapidly in times where personal spending is much more carefully considered. We can see from our site measures that customers coming in on one brand may end up enquiring on a completely different one.

We note that the brands where deals are there to be had online seem to be the same ones who are doing well in uncertain times. We also note that those encouraging customers to continue using the dealer network are also benefiting from high satisfaction.

We can also receive emails from customers that provide supporting evidence for all we’ve covered. For example…

“I couldn’t get a deal on a MakeX car, so I went for a MakeY… I liked the sliding door, loads of gadgets, much more space. The dealer offered interest free finance too.”

“What an amazing site. I was contacted by a Make Z dealer and confirmed purchase today. Less than 48 hours after submitting my request. Many many thanks” (this arrived as I was writing this post).

The customers speak for themselves… we need to continue to be ready to respond to their needs.