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Blogs

  • Don’t panic about cash for bangers scheme

    Published 11th May 2009 Published 11th May 2009

    It’s all the industry seems to have talked during recent weeks – and here at vrs it’s been no exception either – but yes, we want to talk some more about the scrappage scheme.

    And we’d be the first to admit that, on the face of it, the “cash for bangers” proposals did cause us at least a few moments of concern. Now, however, that it’s all finally been announced and the details bottomed out, we’re all heaving a huge sigh of relief. That’s because, whichever way you look at it, we don’t actually think it’s going to have any real impact on the used market, for several reasons, at least in the short to medium term.

    Firstly, we agree with Glass’ on this one. These discounted new models won’t start to make quality late-plates look unpalatably expensive. If 2k was going to make all the difference, new car sales wouldn’t be in the doldrums like they are right now. After all, manufacturers have been discounting like crazy over recent months – and many to the tune of more than £2k if you negotiated really hard – with no visible impact on new sales. So why should now be any different, just because the Government is going to stump up half of the discount?

    Secondly, think about who currently drives models that are ten years old or more. Chances are, if you’re not a classics or retro enthusiast, if you’re driving round in a T-plate or older, then it’s because you don’t have the cash to trade up. Statistics show that the majority or drivers of older plates are on low incomes so, an extra £2,000 towards the price of a shiny new motor isn’t really going to make much difference, especially when you consider just how tight finance is right now. The ideal candidates for this scheme simply aren’t going to be able to borrow enough to take up the offer.

    So, our fears seem ungrounded. Whilst we worried that two-grand-in-the-hand might start to erode the differential between new and used, particularly as residuals had risen so sharply over the past few months, the fact is that there simply aren’t enough potential buyers out there who will qualify for the scheme to dent the used market.

  • Shortage of quality used vehicles closer than we think

    Published 15th April 2009 Published 15th April 2009

    OK, we’re all delighted that stock that’s been sat around for some months has suddenly started shifting like hot cakes. Whilst new car sales have gone through the floor right now, you can almost hear the collective sigh of relief across the used market.

    Stock that we all thought had grown roots it’s been so long since it’s moved is flying again - and there’s even considerably more than a flicker in prestige, SUV and 4x4 sectors. But for just how long can we expect enjoy this sudden boom? Until the number of customers dries up again?

    Or, perhaps - and we think this is more likely - until the supply of quality used and late-plate models dries up so forcing prices back up again and keeping customers at bay.

    And dry up it will. The fall in new car sales over the past 12 months is already impacting on the late-plate pipeline and, with many motor manufacturers effectively shelving production for the foreseeable future, the lack of supply in the used market could rumble on for some time.

    At some point, the inevitable laws of supply and demand will come into play. Lack of quality used models will force prices up again to such a level where new sales – with all their incentives, free add-ons and 0% finance deals – start to appeal again.

    As used prices rise – and the manufacturers continue to kick out some exceptional OTR deals to tempt buyers back to new – the difference between new and used will become marginal enough to tempt buyers back into new. Which we think is, ultimately, good news for the used market but it will take time to filter through

    So, in the long term we will find the equilibrium that we’ve enjoyed for so many years but, in the short and medium term, supply will become an issue so we say, get it where you can!

  • Any relief to be had?

    Published 11th March 2009 Published 11th March 2009

    With UK interest rates now at their lowest rates since 1951, is there any relief to be had for the motor trade?

    Banks and building societies are coming under pressure to pass rate cuts on to their mortgage customers but where’s the joy in that for the car trade?

    With the vast majority of cars bought through finance it’s the lack of liquidity – not the rates – that is blocking these vital finance lines.

    Although mortgage rates may start to drop, freeing up a bit of extra disposable income in many UK households, the availability of unsecured funds – the lifeblood of the motor industry – remains so far totally unaffected by Mr Darlings’ aggressive rate cuts.

    Meanwhile, PriceWaterhouseCoopers has issued a report suggesting that in spite of the downturn, UK consumers are still “credit hungry” and are still prepared to borrow. Perhaps this continued clear demand will, at some point, start to influence supply in 2009?