James Baggott

Why car dealers need to hold their nerve on used car prices

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Morning

Been working on this - crystal ball time, but some interesting comments in it nonetheless.

Investigation: Why car dealers need to hold their nerve on used car prices - and what happens next to values?

We've taken a close look at the used car market as fears of dealers liquidating stock could see prices tumble. Dealers tell us the trade needs to hold tight and stay firm.

https://cardealermagazine.co.uk/publish/investigation-car-dealers-need-hold-nerve-used-car-prices-attention-turns-happens-next/191381

Let me know your thoughts as always

 

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100% hold tight as once they sell its going to be a really tough job replacing. 

Bounce back loans could see dealers using that to stock up which could push prices up and there will be a real fight for stock. Those of us who have been selling and delivering have certainly not been able to replace at the same level.

 

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Interestingly, a month after having closed their website, I got a call from our Motability rep to say they were going to list 200 cars at 09.00 this morning. I forgot about it and only just logged on. 99 of the 200 have been sold. They're all stock cars held at their refurb centre in Stoke so should have minimal prep. Having a look at the prices, many of them are under May CAP Below prices with free delivery! Is it time to fill boots, or is this going to be the way prices are going?

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Thanks James, a good detailed article there. Personally I think it will depend on mainly 2 factors, 1) the approach of stocking loans providers, 2) whether dealers can save on fixed costs eg rent, salaries when some kind of partial- or gradual restart to the economy occurs. The second point applies to the wider economy, without that then sure, supply and demand will be very unstable and cause a lot of variation in prices.

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Good article James.

I think certain sectors will be stronger than others,  when we all reopen.  I think the cheaper end will be busy,  with less people taking public transport.  

Not so sure about the luxury prestige end of the market.

If will be nice  to not get the   " £5000 cash in your hand today mate"   messages,  on a £7500 van.   lol

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It is all right saying hold your nerve,but what happens if values take a big drop.After the 08 crisis we were forced to mark up a lot of stock £2000 cheaper to stay in the game.We took a big hit but then we restocked quickly,were not greedy and were knocking stuff out.

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Excellent article

The thing to remember unless you need to have a fire sale is

Selling tenners for fivers and then having to pay tenners for fivers makes absolutely zero sense. Hold tight.’ is the fullest answer

I'm sure we've all mugged stock away at less than cost then just gone out and bought the same stuff again

 

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5 hours ago, Rory RSC said:

100% hold tight as once they sell its going to be a really tough job replacing. 

Bounce back loans could see dealers using that to stock up which could push prices up and there will be a real fight for stock. Those of us who have been selling and delivering have certainly not been able to replace at the same level.

 

I couldn’t agree more I’ve been fortunate enough to sell a few cars over the last few weeks but replacing them at the right price is proving difficult. I’ve only managed to get lucky with a couple from BCA

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1 hour ago, New year revolutions...... said:

Excellent article

The thing to remember unless you need to have a fire sale is

Selling tenners for fivers and then having to pay tenners for fivers makes absolutely zero sense. Hold tight.’ is the fullest answer

I'm sure we've all mugged stock away at less than cost then just gone out and bought the same stuff again

 

Most of the guys quoted are not car dealers like us,they are just rotating employees with no skin in the game and bullshit theories.It is easy for them to say ‘hold your nerve’.You have to factor in what happens if prices at the block plummet for similar stock to yours ( like 08 ).A competitor near bye might be buying them and knocking them out a grand or more cheaper.So what do you do,you can’t just sit still with £x grand p/w overheads doing zero business and guess when things might return to normal.I may be wrong,but I don’t think Car Giant did that after 08 and no one is better than them.

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3 hours ago, trade vet said:

It is all right saying hold your nerve,but what happens if values take a big drop.After the 08 crisis we were forced to mark up a lot of stock £2000 cheaper to stay in the game.We took a big hit but then we restocked quickly,were not greedy and were knocking stuff out.

It’s being quick to adapt to whatever’s right for you but at this time there really is a limited supply of used, our supply chains all but dried up. 

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Its been hard to replace stock because theres nothing out there to buy.

BCA are selling 100 crappers a day, Mostly grade 3-5 stock that was clogging up their yards. Manheim effectively closed, Aston Barclay and Flag running the odd small sale. Most of the big fleet sellers have sat on their hands and decided to sit it out, cant buy anything out of VWFS or Mercedes for example. They will crawl out of their shell eventually and flood the market.

Pretty sure your fiesta/astra/mondeo stock will still be fine but above 15K there is going to be excess supply and stuff will be cheap.

Thats before we even consider the amount of dealers that are 6-8 weeks away from going belly up. 

Not saying its panic stations but cant see any benefit in holding back current stock.

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As above, I’m worried about trying to stock up now in case I pay to much and the used prices fall through the floor once out of lockdown. Although on the other hand there is going to be a huge shortage of stock once auctions reopen as they’ve had nothing coming in and neither will any of their suppliers. 

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you can hold your nerve all you like regards pricing, but the trade don't dictate values the market does based on demand - unless you are very specialist. pricing will all come down to how much a dealer needs to make a week, many will hold nerve many won't.

regards replacing stock, it has been a shocker during this crisis seeing how many smaller dealers are 100% reliant on buying stock from auction.

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Thanks for all your thoughts. I’ll keep an eye out on what happens. Trying to get the best picture from those out there who aren’t on furlough. Not the easiest thing right now...

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james, maybe you could get to talk with one of the bigger fleet operators? would be nice to know their opinions on short term values and expectations regarding a possible influx of early fleet returns from the inevitable business reductions / closures.

failing that maybe someone from CAP or GLASS who tend to be in daily contact with the fleets anyway.

cheers.

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I have not done any sales since lockdown, think it is well documented on here that i will not deliver, so, by holding onto my stock, some ready some not, and dealers reporting can not get stock, i have done the right thing, because i know for a fact that delivering cars is not economical, both in money and sanity ?

so, in theory, purchasing will be more expensive after lockdown, and by holding on, my stock should raise in value ? :)

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17 minutes ago, James Baggott said:

Thanks for all your thoughts. I’ll keep an eye out on what happens. Trying to get the best picture from those out there who aren’t on furlough. Not the easiest thing right now...

Study your autotrader I say for within so many miles of your home

It's an interesting picture

All the traders near me who shouldn't be doing this job have cars now that shows as low price, I believe they are on stocking loans and I seriously hope they blow

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Posted (edited)
51 minutes ago, New year revolutions...... said:

Study your autotrader I say for within so many miles of your home

It's an interesting picture

All the traders near me who shouldn't be doing this job have cars now that shows as low price, I believe they are on stocking loans and I seriously hope they blow

your nearly right on this one, the stocking loan company's have all given good or reasonable extensions so that is not the reason,  the reductions you see are likely because of the other overheads and pressure.

note - opinion formed whilst sat in my slippers not pointy shoes, based on supplying many of these dealers nationally for many years.;)

Edited by awc1000
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11 hours ago, trade vet said:

It is all right saying hold your nerve,but what happens if values take a big drop.After the 08 crisis we were forced to mark up a lot of stock £2000 cheaper to stay in the game.We took a big hit but then we restocked quickly,were not greedy and were knocking stuff out.

Surely this above?

This crisis will be 2009 with bells on. How many people likely to be unemployed? And those who are still in employment will be in fear of their jobs.

As 2009 was primarily an issue for the banks the knock on to unemployment was quite low. People are taking about unemployment going from 3.9% to 10% as a minimum.

Dump stock, take the hit then start re-stock as it is looking a lot like lower prices within the 6-8 week period after normal supply resumes. I suspect there will be a rush of dealers initially trying to restock will keep prices up in the first week or so?

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Posted (edited)

I think this depends a little at what ends of the market you are working at and if you are not careful you will just slash prices for the sake of it when there will be no need.

i think there may be a slight dip initially with dealers holding back and seeing what's happening but realistically I think supply won't be great.

There will be what's sitting at the auctions now ready to go but it will take a while for the main dealers to get back up to speed with the part exchanges coming through which means supply will be low initially which I think will help prices.

i have been in the game a while and have worked through a couple of recessions and if you are not careful you will talk yourself into working for nothing and we carried on selling through them profitably.

just keep an eye on the auction prices and if they start nudging down just be mindful deal your self out of what you have when you can, and restock at reduced prices.

i for one will not be slashing prices from the word go.

Edited by Lazz
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19 minutes ago, Lazz said:

I think this depends a little at what ends of the market you are working at and if you are not careful you will just slash prices for the sake of it when there will be no need.

i think there may be a slight dip initially with dealers holding back and seeing what's happening but realistically I think supply won't be great.

There will be what's sitting at the auctions now ready to go but it will take a while for the main dealers to get back up to speed with the part exchanges coming through which means supply will be low initially which I think will help prices.

i have been in the game a while and have worked through a couple of recessions and if you are not careful you will talk yourself into working for nothing and we carried on selling through them profitably.

just keep an eye on the auction prices and if they start nudging down just be mindful deal your self out of what you have when you can, and restock at reduced prices.

i for one will not be slashing prices from the word go.

Absolutely correct

I always say why buy work

I have done the buy the stock mug it away only to buy the same stuff 3 weeks later

Sit tight if you can 

1 hour ago, awc1000 said:

your nearly right on this one, the stocking loan company's have all given good or reasonable extensions so that is not the reason,  the reductions you see are likely because of the other overheads and pressure.

note - opinion formed whilst sat in my slippers not pointy shoes, based on supplying many of these dealers nationally for many years.;)

Words

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20 minutes ago, New year revolutions...... said:

Absolutely correct

I always say why buy work

I have done the buy the stock mug it away only to buy the same stuff 3 weeks later

Sit tight if you can 

Words

you wouldn't understand anyway, your clearly one of the new wave of mid 20's traders who probably borrowed a few quid and mastered an i-pad, now your an expert.

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A lot of stock shows as low price on Autotrader as averages appear to have gone up maybe due to reduced numbers. 
 

we even increased a few prices and will be doing so again over the next day or 2 in line with market.

 

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Posted (edited)

A couple of months ago a lot of folks were posting on here about Covid being 'no worse than flu'. I did post at the time that it was going to be very serious and 'failing to plan is planning to fail'. We stopped buying anything from late January and ran stock down as quickly as possible, with quite a lot going to auction (at decent prices too). So at lockdown we had about 11 cars (about 25% of normal stock). Two of those are provisionally sold to personal contacts.

We are not selling, but open for service and MoT - reasonably busy.

In terms of 'holding nerve' on prices, that's just not the way the used car market works. We are just one fish swimming in a big shoal. CAP values at the moment are meaningless - there are insufficient transactions to give reliable data.

I think a lot of people are not fully grasping the scale of the economic storm we are facing.  The motor industry is going to be one of the worst sectors affected. Probably 50% of all motor trade jobs will go - 2M jobs..

https://www.iser.essex.ac.uk/2020/04/18/new-analysis-of-the-impact-of-lockdown-on-uk-jobs

We seem to be heading for a No Deal Brexit at the end of the year which will likely result in a further devaluation of the pound. So imported cars and parts (and everything else) will get more expensive and inflation will take off. Unemployment will be much higher, taxes will be higher. It will be a 1930's style recession.  The plan for the next 12 months is just to survive.

Edited by Halfpenny
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