There’s a new car sales boom and Britain’s automotive industry is in rude health. But while 2015 is on the way to becoming a record year for car sales, there are still plenty of bargains for new car buyers to snap up. Some experts are saying that new car buyers have never had it so good because car makers are competing so hard against one another in the bid to win new customers and keep existing owners loyal to their brand.
New car sales boom: How can dealers offer these bargains?
Car dealerships do something called self, pre- or tactical registering. This is when they effectively sell the cars to themselves. This enables them to hit stiff targets set by the car manufacturers. When they hit these targets, they get a bonus from the car makers. This is sometimes better than the margin they make on selling a new car to a normal customer. After 90 days, the dealer can then sell the car. These cars are brand new but frequently have a cheaper price than you might expect to pay and they generally have fewer than 100 miles on the clock.
New car sales boom: What are some of the best deals on a new car?
Currently you could buy a Volvo XC60 D4 R Design Lux Nav with a handful of miles for £30,750 against a list price of £37,155. Or you could get a Mercedes-Benz C250 Bluetec Sport with delivery mileage for £23,250 – yet the list price is £27,695. This is having a knock-on effect on second-hand prices of cars too. For example you can buy a pre-registered 2015 Volkswagen Golf 1.4TSI for £19,150. However, in identical trim and specification you could buy a 2014 64-reg version that has done 5000 miles and actually costs £345 more.
New car sales boom: Why are pre-registered cars so cheap?
Pre-registered cars are effectively brand new – don’t confuse them with a demonstrator – and have been taken on as stock by dealers often to achieve the manufacturer’s sales targets and qualify for a financial incentive. They’ll have a handful of miles on the clock but should be unused. However, the downside of the bargain price is that they’ll have an extra owner on the V5C log book. So if you buy a pre-registered car, you’ll be its second owner. It means when you come to sell it you won’t be able to ask quite as much as someone with an identical car who’s owned it from new. If a maker offers you a pre-registered car, make sure you check it over thoroughly. It may have been sitting around for a couple of months so it could have picked up the odd knock or scrape.
New car sales boom: What other benefits will we see?
Large dealers with greater spending power can pre-register more cars and offer them for less money than smaller dealer groups. Phil Nothard from used car valuation service CAP Automotive explained: “They can’t compete on deals so they have to attract customers in different ways.” So, for example, a smaller dealer might offer better service such as promising customers free car valets.
New car sales boom: Why it will come to an end
Dealers have to tie considerable resources up in pre-registered cars. Suppose a dealer has 10 cars pre-registered, each worth on average £18,000, that’s £180,000 it can’t spend on anything else. And the law says they can’t sell those cars for 90 days. Sue Robinson, director of trade body the National Franchised Dealers Association (NFDA) said: “This is getting to an unacceptable level. It’s becoming unwieldy and from an economic point of view, it’s distorting the market. I’ve written to a number of car manufacturers on behalf of the NFDA saying: ‘This has gone too far, how do we stop it?’”
New car sales boom: Why this is happening
Self-registering cars has been going on for years. However, the car makers are in a bit of a vicious circle now. Looking at the mass market, companies such as Ford and Vauxhall have traditionally sold more cars than other makers. If that state of affairs doesn’t continue, they will be perceived as failing. However, their market share is being eroded. Makers such as Hyundai, Kia and Dacia are making great cars at the budget end of the market.
Meanwhile at the top of the market, premium brands such as BMW and Volkswagen are increasingly competing for mass market share as they strive to sell more cars. “No one likes to go backwards when it comes to car sales,” industry analyst Phil Nothard said. The result is car makers are setting their dealers ever more ambitious sales targets to ensure they keep up with their rivals by not bucking the increasing sales trend. The dealers have no choice but to pre-register if they’re to hit these targets. And that means cheaper cars for customers.