Will Coronavirus hit used car prices?
Discussion
Deep Thought said:
Throttlebody said:
Real data. With UK unemployment forecasts of circa 10% you can see where new car registrations are heading.
And a (potentially short term) drop in employment translates to a 25% drop in car dealership staff does it?New car sales is only part of what a franchise does. They probably do more used car sales than new and the used car sales are likely to be more profitable . On top of that a lot of their work is warranty, maintenance, service and parts.
Oh - and glad we're now in agreement that unemployment is going to reach around 10%
Edited by Deep Thought on Sunday 7th June 10:46
My input was an example of how new car sales mirror unemployment levels, not franchised % dealer redundancies.
Throttlebody said:
Best to read and digest the post before the fertile imagination lets rip.
My input was an example of how new car sales mirror unemployment levels, not franchised % dealer redundancies.
Best to read and keep up with the conversation.My input was an example of how new car sales mirror unemployment levels, not franchised % dealer redundancies.
I had explicitly said just before that
Deep Thought said:
Agreed yes. There is no doubt a link, though not convinced that link will equate to mass redundancies on the scale of 150,000 as the article suggests.
I had already agreed with you that there was a direct correlation between employment levels and new car registrations.The point in hand was - does that perceived rise in unemployment equate to 150,000 redundancies in the car sales sector?
Its my view that it doesnt.
Perhaps if you could comment on that?
Edited by Deep Thought on Sunday 7th June 13:19
Have been following this thread with interest, and surprised by some of the venom behind the We're Doomed / Everything's Fine camps.
I'm no economist, but even as an optimist I have to concede it is inevitable we will see a big drop in used car prices. The last quarter saw a dip in GDP, despite only incurring a week of lockdown. This quarter will inevitably see the greatest drop in GDP in history, and I suspect a second dip in the stock market.
Yes, some industries and in turn some people are doing well out of this. I'm an IT contractor and for now, things are rosy - I'm in a contract, and I'm saving £1000 per month on commuting costs, so in effect have enjoyed a short-term a pay rise. But we're yet to see the real effects - once furlough ends, cheap money runs out and small businesses can sadly no longer continue to weather the storm, that's when we'll hit recession and prices will drop. Similarly, I will invariably find it harder to find a new contract, so my own, self-funded furlough between contracts will be longer.
The population as a whole will have less spare cash, and a new car will be well down the list of priorities. Similarly, the "pent-up" is merely estate agent speak for "carry on buying" - inevitable housing market will slow, even in the South.
None of this is new - the stock and housing markets were due a downturn in their respective cycles. Some have been predicting this for years. If not Covid-19, something else would have been credited as the catalyst.
I'm more interested in the longer term impact - before Corona, I had decided on splitting my cars between a daily and a toy. However, post Corona, I suspect my historic 4 day a week may become a 1 or 2 day a week commute, which defeats the purpose of getting a dedicated daily driver...
I'm no economist, but even as an optimist I have to concede it is inevitable we will see a big drop in used car prices. The last quarter saw a dip in GDP, despite only incurring a week of lockdown. This quarter will inevitably see the greatest drop in GDP in history, and I suspect a second dip in the stock market.
Yes, some industries and in turn some people are doing well out of this. I'm an IT contractor and for now, things are rosy - I'm in a contract, and I'm saving £1000 per month on commuting costs, so in effect have enjoyed a short-term a pay rise. But we're yet to see the real effects - once furlough ends, cheap money runs out and small businesses can sadly no longer continue to weather the storm, that's when we'll hit recession and prices will drop. Similarly, I will invariably find it harder to find a new contract, so my own, self-funded furlough between contracts will be longer.
The population as a whole will have less spare cash, and a new car will be well down the list of priorities. Similarly, the "pent-up" is merely estate agent speak for "carry on buying" - inevitable housing market will slow, even in the South.
None of this is new - the stock and housing markets were due a downturn in their respective cycles. Some have been predicting this for years. If not Covid-19, something else would have been credited as the catalyst.
I'm more interested in the longer term impact - before Corona, I had decided on splitting my cars between a daily and a toy. However, post Corona, I suspect my historic 4 day a week may become a 1 or 2 day a week commute, which defeats the purpose of getting a dedicated daily driver...
Edited by Fiisch on Sunday 7th June 13:18
Welshbeef said:
Given so many cars are on condition based servicing we will clearly see a shift to the time limit instead so less work for garages.
Only - surely - because we're in the middle of lockdown and not a long term trend?That will reduce in significance as the country opens up again (and bearing in mind people are being told to avoid public transport).
jammy-git said:
Given that we're seeing a move to online vehicle purchasing, at least in the short term, could that not translate to dealerships looking, or needing to lay off more staff because a certain percentage of new car purchases won't be done via a dealership, or at least in the dealership itself?
Online click and collect will be a growing element of sales but the traditional car dealership, salesmen model has been honed over many years. Small steps.What you will see is manufacturers and dealerships reacting to significantly reduced new car sales by becoming leaner and more efficient. That will result in complete dealership closures, reduced footprints.
That was all happening pre CV19, it will only be accelerated now.
Butter Face said:
All is correct.
And to be frank, since customers have been able to visit showrooms again we haven’t conducted a single ‘online’ sale. A few online enquiries granted, but those customers have then visited the showroom and bought.
Wouldn't most online sales of new cars have gone directly through the manufacturer though?And to be frank, since customers have been able to visit showrooms again we haven’t conducted a single ‘online’ sale. A few online enquiries granted, but those customers have then visited the showroom and bought.
Fiisch said:
Have been following this thread with interest, and surprised by some of the venom behind the We're Doomed / Everything's Fine camps.
I'm no economist, but even as an optimist I have to concede it is inevitable we will see a big drop in used car prices. The last quarter saw a dip in GDP, despite only incurring a week of lockdown. This quarter will inevitably see the greatest drop in GDP in history, and I suspect a second dip in the stock market.
Yes, some industries and in turn some people are doing well out of this. I'm an IT contractor and for now, things are rosy - I'm in a contract, and I'm saving £1000 per month on commuting costs, so in effect have enjoyed a short-term a pay rise. But we're yet to see the real effects - once furlough ends, cheap money runs out and small businesses can sadly no longer continue to weather the storm, that's when we'll hit recession and prices will drop. Similarly, I will invariably find it harder to find a new contract, so my own, self-funded furlough between contracts will be longer.
The population as a whole will have less spare cash, and a new car will be well down the list of priorities. Similarly, the "pent-up" is merely estate agent speak for "carry on buying" - inevitable housing market will slow, even in the South.
None of this is new - the stock and housing markets were due a downturn in their respective cycles. Some have been predicting this for years. If not Covid-19, something else would have been credited as the catalyst.
I'm more interested in the longer term impact - before Corona, I had decided on splitting my cars between a daily and a toy. However, post Corona, I suspect my historic 4 day a week may become a 1 or 2 day a week commute, which defeats the purpose of getting a dedicated daily driver...
The stock markets are at all time highs, not sure why you think equities mean anything to the real economy.I'm no economist, but even as an optimist I have to concede it is inevitable we will see a big drop in used car prices. The last quarter saw a dip in GDP, despite only incurring a week of lockdown. This quarter will inevitably see the greatest drop in GDP in history, and I suspect a second dip in the stock market.
Yes, some industries and in turn some people are doing well out of this. I'm an IT contractor and for now, things are rosy - I'm in a contract, and I'm saving £1000 per month on commuting costs, so in effect have enjoyed a short-term a pay rise. But we're yet to see the real effects - once furlough ends, cheap money runs out and small businesses can sadly no longer continue to weather the storm, that's when we'll hit recession and prices will drop. Similarly, I will invariably find it harder to find a new contract, so my own, self-funded furlough between contracts will be longer.
The population as a whole will have less spare cash, and a new car will be well down the list of priorities. Similarly, the "pent-up" is merely estate agent speak for "carry on buying" - inevitable housing market will slow, even in the South.
None of this is new - the stock and housing markets were due a downturn in their respective cycles. Some have been predicting this for years. If not Covid-19, something else would have been credited as the catalyst.
I'm more interested in the longer term impact - before Corona, I had decided on splitting my cars between a daily and a toy. However, post Corona, I suspect my historic 4 day a week may become a 1 or 2 day a week commute, which defeats the purpose of getting a dedicated daily driver...
Edited by Fiisch on Sunday 7th June 13:18
jammy-git said:
Butter Face said:
All is correct.
And to be frank, since customers have been able to visit showrooms again we haven’t conducted a single ‘online’ sale. A few online enquiries granted, but those customers have then visited the showroom and bought.
Wouldn't most online sales of new cars have gone directly through the manufacturer though?And to be frank, since customers have been able to visit showrooms again we haven’t conducted a single ‘online’ sale. A few online enquiries granted, but those customers have then visited the showroom and bought.
If you order a car online, they just send your details to a dealer to order a car.
Edited by Butter Face on Sunday 7th June 13:35
jsf said:
The stock markets are at all time highs, not sure why you think equities mean anything to the real economy.
No they're not. The funds I hold (global passive funds that are fairly mainstream/prominent) are still 10-20% off pre-Covid prices.
The Aviva, HSBC and IAG stock I bought during Covid are still well off their "all-time highs" - indeed, IAG is less than half what it was six months ago.
Of course there's a correlation between equities and the real economy.
Throttlebody said:
jammy-git said:
Given that we're seeing a move to online vehicle purchasing, at least in the short term, could that not translate to dealerships looking, or needing to lay off more staff because a certain percentage of new car purchases won't be done via a dealership, or at least in the dealership itself?
Online click and collect will be a growing element of sales but the traditional car dealership, salesmen model has been honed over many years. Small steps.What you will see is manufacturers and dealerships reacting to significantly reduced new car sales by becoming leaner and more efficient. That will result in complete dealership closures, reduced footprints.
That was all happening pre CV19, it will only be accelerated now.
Its not the nirvana that some might think it is - for kick off, it reduces your negotiating ability, and secondly it falls on its ass when someone has a trade in and ultimately its very hard to get a feel for the car by looking at some glossy pics on a website.
I will ALWAYS opt to go to a dealer to buy a car if it is at all possible for me to do so because i know almost without doubt i'm likely to negotiate a better deal on the car i'm buying and the trade in if i'm right there, rather than "Click BUY to reserve now" on the dealers website.
maz8062 said:
I don't understand why you can't see this happening. Hypothetically speaking, let's say you were a car dealership that employed 10 staff to cover sales, admin, service, parts etc. While your dealership has been closed you decided to put 8 of the 10 staff on Furlough comforted by the government contributions to their wages. Now, when Furtlough contributions end in October would you immediately rehire all of the staff that were previously on furlough, or would you take the opportunity to take stock and re-scale your business based on your view of future demand?
This is the unintended consequences of the furlough scheme. Businesses up and down the country will be taking stock and factoring in not only the impact of COVID but also a no-deal Brexit looming at the end of this year. The future is uncertain so I expect businesses to tread carefully, at least for the immediate future.
Yes there is another unintended consequence of ll this covid thing as well. Business are organising and streamlining how they deal with their customers. Remember that old saying customer is king? Well at the moment the company is king. You are directed what the rules are on how you transact with the companies that are open. Queue here pre order there etc. For the car retail sector this is a huge change. The days of the tyre kicker are numbered and it's great for these businesses. Interested in a car? Great you come to view that particular car at a given time slot. Totally removes the ease of going round tyre kicking. Want that test drive? £50 valeting fee thanks. The only traders that will be easy to deal with for timewasters are the crap ones who care as much about their stock as they do their vetting and hygiene processes. Car industry and many others will unfortunately realise they can survive on a much lower staff if they just flush the dithering out of the consumer and this will see many getting laid off whilst I think the vast majority of actually core businesses will be OK. I've long said that retail is not a leisure activity and somehow society has turned consumerism into a hobby. I think changing this attitude will be good for everyone in the long term.This is the unintended consequences of the furlough scheme. Businesses up and down the country will be taking stock and factoring in not only the impact of COVID but also a no-deal Brexit looming at the end of this year. The future is uncertain so I expect businesses to tread carefully, at least for the immediate future.
Today we went out (first maccies in 3 months!) hardly any queue. You get told where to go. Limited menu. In and out very efficient. On the way we went past Halfords. They don't even let you in the shop. Want something? They go get it for you. No dithering no taking up time of the staff waffling about a satnav before ordering one from amazon in the car park. In the car trade you will be vetted before being able to take up a slespersons time. Arriving on a bike with socks/sandals/notebook and a tape measure? Might as well not even bother.
jammy-git said:
Butter Face said:
All is correct.
And to be frank, since customers have been able to visit showrooms again we haven’t conducted a single ‘online’ sale. A few online enquiries granted, but those customers have then visited the showroom and bought.
Wouldn't most online sales of new cars have gone directly through the manufacturer though?And to be frank, since customers have been able to visit showrooms again we haven’t conducted a single ‘online’ sale. A few online enquiries granted, but those customers have then visited the showroom and bought.
Inky81 said:
Which stock markets are you referring to? FTSE is well below it's best. It's rallied, but I wouldn't call it an all time high.
NASDAQ broke its record this week, other major composites are recovering at rapid rates.My own pension funds are the highest they have been, but then i manage that split of funds myself rather than relying on what most people do of never switching funds, most still have their money in the split as it was setup when the policy was started, which gives pretty crappy returns usually.
Deep Thought said:
No. Almost all manufacturers operate through a franchise network, not through direct sales.
Ah fair enough. I thought some had started to move towards the same model as Tesla and offer sales directly.I imagine that would majorly p
s off their franchised dealership partners though.fridaypassion said:
Yes there is another unintended consequence of ll this covid thing as well. Business are organising and streamlining how they deal with their customers. Remember that old saying customer is king? Well at the moment the company is king. You are directed what the rules are on how you transact with the companies that are open. Queue here pre order there etc. For the car retail sector this is a huge change. The days of the tyre kicker are numbered and it's great for these businesses. Interested in a car? Great you come to view that particular car at a given time slot. Totally removes the ease of going round tyre kicking. Want that test drive? £50 valeting fee thanks. The only traders that will be easy to deal with for timewasters are the crap ones who care as much about their stock as they do their vetting and hygiene processes. Car industry and many others will unfortunately realise they can survive on a much lower staff if they just flush the dithering out of the consumer and this will see many getting laid off whilst I think the vast majority of actually core businesses will be OK. I've long said that retail is not a leisure activity and somehow society has turned consumerism into a hobby. I think changing this attitude will be good for everyone in the long term.
Today we went out (first maccies in 3 months!) hardly any queue. You get told where to go. Limited menu. In and out very efficient. On the way we went past Halfords. They don't even let you in the shop. Want something? They go get it for you. No dithering no taking up time of the staff waffling about a satnav before ordering one from amazon in the car park. In the car trade you will be vetted before being able to take up a slespersons time. Arriving on a bike with socks/sandals/notebook and a tape measure? Might as well not even bother.
Very interesting, and very valid.Today we went out (first maccies in 3 months!) hardly any queue. You get told where to go. Limited menu. In and out very efficient. On the way we went past Halfords. They don't even let you in the shop. Want something? They go get it for you. No dithering no taking up time of the staff waffling about a satnav before ordering one from amazon in the car park. In the car trade you will be vetted before being able to take up a slespersons time. Arriving on a bike with socks/sandals/notebook and a tape measure? Might as well not even bother.
I think you're totally right RE: consumerism has become a hobby.
It will be interesting to see how consumers react to "you've a 10:00 appointment and you need to have made a decision by 11:00 as thats the size of your slot, and we need £x to clean the car if you want a test drive irrespective of whether you buy it or not". It could / should mean that the customer sitting in front of you is ready to buy rather than a "just happened to be in for a filter for my Micra" time waster.
Deep Thought said:
I had already agreed with you that there was a direct correlation between employment levels and new car registrations.
The point in hand was - does that perceived rise in unemployment equate to 150,000 redundancies in the car sales sector?
Its my view that it doesnt.
Perhaps if you could comment on that?
When some of the big players such as Mazda forecast an annual 47% drop in profits, Toyota an 80% drop due to reduced sales, you can see it has that potential.The point in hand was - does that perceived rise in unemployment equate to 150,000 redundancies in the car sales sector?
Its my view that it doesnt.
Perhaps if you could comment on that?
Edited by Deep Thought on Sunday 7th June 13:19
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