Car Dealers Caught Between Volume Reductions and Rising Values

Feb 9 2012

Car Pricing guide CAP Black Book warns that dealers will come under increasing pressure from increasing trade values of used cars on one side and volume reductions on the other in the coming months.  This could force them to purchase cars that need substantial investment in refurbishing before they can be sold, says CAP.

The problem is, therefore, one of low demand and even lower supply.  On the one hand, dealers are faced with sluggish retail sales, on the other hand they are being forced to pay more for their stock because there is insufficient inventory in the market to even satisfy the limited demand.

The reduction in used car stock that CAP anticipates stems from the catastrophic conditions of 2009, when there was a dramatic drop in new car registrations.

Black Book is used by 94% of the country’s top car dealers.  It reports that the dealers who are best able to cope with current market conditions are those who can keep their prices competitive.  This, CAP warns, can cause many car sales businesses to fail in the current climate of rising overheads and tougher competition.

Mark Bulmer, the Editor of Black Book, said “After a spike in volume some major disposal sources are dramatically reducing their sale entry numbers and tell us they will continue to do so in February.”

Low stock levels could, of course, eventually also affect the amount of your next car loan, since it puts pressure on prices.

Author - Louise Hutchinson
 

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