Will Coronavirus hit used car prices?

[kambites]

Throttlebody said:

71% of buyers will want a better new deal than pre CV19. Pressure on dealers.

I'm guessing that actually means 71% of buyers are expecting dealers to be more desperate to sell cars than before the crisis. I'm not convinced that's necessarily true, though.

[anonymous-user]

kambites said:

Throttlebody said:

71% of buyers will want a better new deal than pre CV19. Pressure on dealers.

I'm guessing that actually means 71% of buyers are expecting dealers to be more desperate to sell cars than before the crisis. I'm not convinced that's necessarily true, though.

Not yet, I suspect the number of redundancies will rocket next month once companies have to start contributing to the furlough payments. The £1000 payment is not going to encourage companies to bring their staff back if they don't have any work for them.

Surely if the people on Furlough still had a valid job they would be called back by now, I don't think things are going to magically get back to normal and these 9 million jobs will suddenly be viable again in the next 3 months.

[kambites]

No but that doesn't necessarily mean dealers are going to be willing to sell their cars for less. In fact it could easily mean dealer margins rising because they have other debts which have built up during the lockdown to service.

[Deep Thought]

Throttlebody said:

Keeping in the 21st Century. Latest survey -

22% of new car buyers will be have to downsize post CV19 due to stretched budgets. Pressure on Chelsea Taxis.

They may well downsize - though that seems a v high percentage - but it still generates a new car sale. In the grand scheme of things is it much of a problem for dealers if someone buyers one unit (say an A4 Estate) or a different unit (a Q5)? Its still a sale, its still likely to generate a finance commission, its still likely to allow an upselling of products, and it still generates servicing and warranty work.

Throttlebody said:

71% of buyers will want a better new deal than pre CV19. Pressure on dealers.

As has been said, buyers always want a better deal. It doesnt mean if they dont get it they wont buy. It'll be down to expectation management and - as i said yesterday - ensuring a balance if found that is palatable for the buyer and the dealership.

[Throttlebody]

av185 said:

Link to survey?

Buyers always demand better deals irrespective of the economic backdrop.

What Car - for it’s latest weekly Insight report. Fairly robust feedback.

[Scootersp]

kambites said:

No but that doesn't necessarily mean dealers are going to be willing to sell their cars for less. In fact it could easily mean dealer margins rising because they have other debts which have built up during the lockdown to service.

Tricky balance as they'll need to move units if things slow up, but agreed that price cutting doesn't necessarily solve the issue and could make it worse.

[Scootersp]

Joey Deacon said:

Not yet, I suspect the number of redundancies will rocket next month once companies have to start contributing to the furlough payments. The £1000 payment is not going to encourage companies to bring their staff back if they don't have any work for them.

Surely if the people on Furlough still had a valid job they would be called back by now, I don't think things are going to magically get back to normal and these 9 million jobs will suddenly be viable again in the next 3 months.

It's a mix some furloughed staff are furloughed because others can 'just about' cope and the extra money helps, things are recovering slowly and the hope is furlough will allow the transition towards getting back to the bulk of the pre covid turnover levels and minimise job loses (this isn't going to happen in Airlines/hospitality etc though) So furlough allows companies to run at 100% (ish) staff efficiency and claim for the excess.

The other side though is that in some companies with part working and part furloughed staff, those not furloughed are still at risk if the overall company doesn't make it through due to dwindling business and too high overheads in general.

Hard to say the numbers on each side and it's an ever changing (improving?) situation.

[anonymous-user]

Joey Deacon said:

Not yet, I suspect the number of redundancies will rocket next month once companies have to start contributing to the furlough payments. The £1000 payment is not going to encourage companies to bring their staff back if they don't have any work for them.

Surely if the people on Furlough still had a valid job they would be called back by now, I don't think things are going to magically get back to normal and these 9 million jobs will suddenly be viable again in the next 3 months.

plenty of sectors still cant function at the moment, the furlough scheme may be enough to buy enough time to get them through to next season.

Thats the case in the arts, motorsport, hospitality etc.

[wsn03]

Don't know where I read it, on here possibly, but with all the working from home just can't see how the car industry isn't going to take a big hit - expensive cars come with bigger margins surely? I would be worried if I was working for JLR, especially knowing how close to the wind they sail.

We are both working, both now likely to be mainly based from home as working practices in our industry (IT) seem to be changing. Some office will return, but the normal Friday from home will most likely become Monday, Thursday, Friday...or maybe it more?

My neighbours had a car write off before lock down, and were about to buy something new. With the change to his work practices seemingly now permanent they've decided to just keep the one car - another sale lost. Wonder how many other households are going to cut down on numbers of cars - the 2nd hand car we are eyeing up (BMW 420 MSport about 6 yrs old) seems to be dropping in price slowly but significantly.

The fallout for the economy has yet to properly start...this is going to be a big one.

[Scootersp]

wsn03 said:

Don't know where I read it, on here possibly, but with all the working from home just can't see how the car industry isn't going to take a big hit - expensive cars come with bigger margins surely? I would be worried if I was working for JLR, especially knowing how close to the wind they sail.

We are both working, both now likely to be mainly based from home as working practices in our industry (IT) seem to be changing. Some office will return, but the normal Friday from home will most likely become Monday, Thursday, Friday...or maybe it more?

My neighbours had a car write off before lock down, and were about to buy something new. With the change to his work practices seemingly now permanent they've decided to just keep the one car - another sale lost. Wonder how many other households are going to cut down on numbers of cars - the 2nd hand car we are eyeing up (BMW 420 MSport about 6 yrs old) seems to be dropping in price slowly but significantly.

The fallout for the economy has yet to properly start...this is going to be a big one.

Yes car buying is on a (relatively) long term cycle per customer and so the effects might be gradual but also stretch a long way forward, as above the decline could stretch further than other areas, but it should allow businesses to adapt and survive but at a cost of losing staff due to just the general lowering of demand/need.

The fuel usage (and so tax take) must still be very low. I am at work for the first time in weeks and the roads are still exceptionally quiet, just no stoppages at any point, whatever the AA route planner time says you can rely on, no need to treble it anymore for the 'rush' hour!

[Sheepshanks]

Scootersp said:

kambites said:

No but that doesn't necessarily mean dealers are going to be willing to sell their cars for less. In fact it could easily mean dealer margins rising because they have other debts which have built up during the lockdown to service.

Tricky balance as they'll need to move units if things slow up, but agreed that price cutting doesn't necessarily solve the issue and could make it worse.

I understood, based on what a dealer book-keeper neighbour told me, your average franchised dealer doesn't make much on selling cars anyway. Servicing is where all their money comes from, plus a bit on parts.

[Sheepshanks]

wsn03 said:

I would be worried if I was working for JLR, especially knowing how close to the wind they sail.

80% of their sales are abroad. China has picked back up strongly.

[Scootersp]

Sheepshanks said:

I understood, based on what a dealer book-keeper neighbour told me, your average franchised dealer doesn't make much on selling cars anyway. Servicing is where all their money comes from, plus a bit on parts.

Yes but again there is a trickle effect, more cars drifting out of warranty and perhaps towards independent servicing garages and less new cars under warranty filling their place....

Not sure what support a dealership has from a manufacturer, I mean if sales drop, who pulls the plug on a dealership? Does the manufacturer have a say or the call overall, I suspect it varies? ie Mercedes Benz world is more manufacturer owner/influenced than say Stratstone but i've no idea on this at all.

[growlerowl]

wsn03 said:

Don't know where I read it, on here possibly, but with all the working from home just can't see how the car industry isn't going to take a big hit - expensive cars come with bigger margins surely? I would be worried if I was working for JLR, especially knowing how close to the wind they sail.

We are both working, both now likely to be mainly based from home as working practices in our industry (IT) seem to be changing. Some office will return, but the normal Friday from home will most likely become Monday, Thursday, Friday...or maybe it more?

My neighbours had a car write off before lock down, and were about to buy something new. With the change to his work practices seemingly now permanent they've decided to just keep the one car - another sale lost. Wonder how many other households are going to cut down on numbers of cars - the 2nd hand car we are eyeing up (BMW 420 MSport about 6 yrs old) seems to be dropping in price slowly but significantly.

The fallout for the economy has yet to properly start...this is going to be a big one.

Many of our customers had previously insisted for years that everything had to be done on site, and remote working wouldn't even be considered. Turns out - lo and behold! - it apparently wasn't as impossible as all that, because with a couple of months there's been a complete 180 and the position is now that on site visits are reserved only for tasks that absolutely require physical presence.
God knows what this might do to used car prices, but surely there has to be some impact from this type of shift, given that it seems pretty widespread.
Does look like we're due for a hard reset. More brutal redundancy numbers today. Not good.

[anonymous-user]

Sheepshanks said:

I understood, based on what a dealer book-keeper neighbour told me, your average franchised dealer doesn't make much on selling cars anyway. Servicing is where all their money comes from, plus a bit on parts.

I would imagine they make the least margin on new car sales. They makes most of their money on the following.

1)Used sales
2)Trade Ins
3)Finance
4)Servicing
)GAP, Tyre Insurance, Dent Insurance, Supaguard (Highest margin plus they have targets for these)

I suspect if you want to buy a brand new car that is not in stock for cash with no part exchange and refuse GAP, Tyre Insurance, Dent Insurance, Supaguard and know the CarWow price you are too much hassle for them.

[Deep Thought]

Joey Deacon said:

Sheepshanks said:

I understood, based on what a dealer book-keeper neighbour told me, your average franchised dealer doesn't make much on selling cars anyway. Servicing is where all their money comes from, plus a bit on parts.

I would imagine they make the least margin on new car sales. They makes most of their money on the following.

1)Used sales
2)Trade Ins
3)Finance
4)Servicing
)GAP, Tyre Insurance, Dent Insurance, Supaguard (Highest margin plus they have targets for these)

I suspect if you want to buy a brand new car that is not in stock for cash with no part exchange and refuse GAP, Tyre Insurance, Dent Insurance, Supaguard and know the CarWow price you are too much hassle for them.

Exactly - and what i said above.

Does it really matter to a dealer if you buy a new A4 rather than a new Q5? They're probably making very very little profit on it anyway. It will just be a unit to them.

Effectively new cars sales, as you say, feeds the dealer with trade ins (resold at decent profit), finance commissions, servicing, warranty work and the opportunity to upsell insurances at the point of sale.

And again - there is this strange belief from a few on here that dealers will not adapt. Granted, some of the marginal ones may close but that demand they were fulfilling then benefits another dealer.

I think the What Car figures quoted are quite bemusing - 71% "want" a better deal? Well hows that been panning out for used car buyers? Not very well i suspect. Theres already a raft of new car incentives anyway such as deferred payments, 0%, free redundancy insurance, etc, etc so i would say the expectation for a better deal is met right there - or at least can be pitched as such.

Edited by Deep Thought on Thursday 9th July 13:24

[TA14]

Deep Thought said:

What Car figures quoted are quite bemusing - 71% "expect" a better deal?

Want a better deal not expect; I'm surprised that it's not 100%. Who doesn't want a better deal?

[Deep Thought]

Scootersp said:

Yes but again there is a trickle effect, more cars drifting out of warranty and perhaps towards independent servicing garages and less new cars under warranty filling their place....

Dealers will adapt what they do and how they sell it. Where servicing of new cars slows down, incentivise those people who previously bought new but have now bought used to get their used car serviced with you anyway. The relationship is already there.

Scootersp said:

Not sure what support a dealership has from a manufacturer, I mean if sales drop, who pulls the plug on a dealership? Does the manufacturer have a say or the call overall, I suspect it varies? ie Mercedes Benz world is more manufacturer owner/influenced than say Stratstone but i've no idea on this at all.

Being franchises, they may well decide they cant be profitable with that franchise OR their sales levels may drop and they have the franchise removed from them. I would imagine manufacturers will be offering a level of support to prevent that happening during the next few years.

I've seen dealers giving up franchises before and thrive afterwards as independents.

Likewise some may close up all together - perhaps some of the ones that are marginal now anyway. They'll either be bought out / absorbed by another franchisee or allowed to be consolidated in to another dealers area.

Yes theres the odd manufacturer that now has its own outlet for sales, but still very much a minority. I would say Mercedes would let Mercedes Benz World operate at a paper loss rather than close it (and maybe they do). It wouldnt send out a great message to other franchisees and other manufacturers if Mercedes couldnt keep their own showcase dealership open.

[Deep Thought]

TA14 said:

Deep Thought said:

What Car figures quoted are quite bemusing - 71% "expect" a better deal?

Want a better deal not expect; I'm surprised that it's not 100%. Who doesn't want a better deal?

Apologies. Corrected now.

ThroBo likes to find one word to scrutinise thus mean he doesnt otherwise address the point being made.

And yes, who doesnt want a better deal?

Edited by Deep Thought on Thursday 9th July 13:41

[Throttlebody]

TA14 said:

Deep Thought said:

What Car figures quoted are quite bemusing - 71% "expect" a better deal?

Want a better deal not expect; I'm surprised that it's not 100%. Who doesn't want a better deal?

Significant point is 71% of buyers want a better deal than was available pre CV19. They see CV19 as a significant milestone in their attitude and expectation for a new car deal.