Investigation: Is pre-registration rife?

YOU know it’s happening. We know it’s happening. But it seems some of the industry is somewhat in denial about the prevalence of pre-registrations.

My column last month – entitled ‘Shouldn’t the SMMT come clean about what’s really going on?’ – led to a flood of emails and tweets from across the industry about whether pre-registrations are happening (they are) and whether they’re a good or bad thing for the industry (debatable).

On January, as the SMMT reports record new car registrations since 2007 with 2.26m cars allegedly finding homes in 2013, we’ve decided to ask the car manufacturers directly whether they know if pre-registrations are taking place.

Out of the 45 manufacturers listed by the SMMT, 17 refused to answer our questions or chose to ignore our request completely. Several responded in a refreshingly frank and honest manner – while some seem to be very much in denial that pre-registrations are taking place.

We contacted every car manufacturer listed in the SMMT registration figures and asked them four questions:

• Do you believe that pre-registrations are rife in the UK car market?
• Do you believe pre-registrations damage the UK car market?
• Would the UK car market be better off without pre registrations?
• Are you aware, and do you take action against, your dealers pre-registering cars?

You may wonder why we are so bothered about pre-registrations. As we’ve reported before, many industry commentators rightly point out that whether the car is new, or sold with delivery mileage on the clock and one owner already in the log book, it’s still a car sale.

We know many of you make good money from pre-registered cars and without them would be a lot worse off. We’re certainly not campaigning to have them stopped – all we want to see is them reported accurately.

One look at the headlines in the mainstream media on the day the figures were released in January highlights the problem of not presenting the public with all the facts.

‘UK car sales highest since 2007,’ shouted BBC News – forgetting that these aren’t necessarily car ‘sales’ but ‘registrations’; two very different things indeed.

The industry seems to forget that the mainstream media doesn’t understand the complexities of running a car dealership. It doesn’t understand that sometimes it makes complete business sense to register a bulk deal of cars to hit a quarterly target.

Our beef is that we are presenting a picture of a car industry that’s far rosier than it actually is – and the problems come with the knock-on effect that has.

CAP consultant Mark Norman explained: ‘Inflated new car registration (not sales) figures can give a misleading impression that all is rosy in the world when it most certainly is not.

‘The media often use overall registration figures as an economic indicator, and if such data ever helped contribute to a rise in my mortgage rate I’d be most upset.’

Politicians are desperate to present a picture of the UK economy bouncing back out of recession – and will jump on any data that backs up their needs.

‘UK car sales top pre-2007 levels. See how we’re growing the UK economy,’ tweeted Prime Minister David Cameron. And if even the PM is mistaking registrations for sales, that surely can’t be a good thing.

Norman added: ‘Hopefully Mark Carney [Bank of England governor] knows that there is a massive difference between registrations and sales. The reality is that strong new car registration figures, which contain a high proportion of pre-registered volume, is an indicator that all is not well and supply is exceeding demand.’

Pre-reg cars aren’t necessarily a bad thing, though. Consumers get a cracking deal on a ‘new’ car and that sale still helps keep many people in jobs.

‘Pre-registrations can provide ordinary consumers with the opportunity to buy “new” cars at more affordable prices,’ said CAP consultant Norman.

‘Dealers still make money from them and each car registered generates work for a host of people in distribution, preparation, advertising, sales and admin. They are also a good way of hedging against depreciation because in the majority of cases the “big hit” has already happened.’

But that’s not to say pre-registering cars doesn’t cause problems either. Norman says that not only does it make the job of forecasters, such as CAP, very tough indeed but it can also have an impact on prices.

‘Depreciation is often higher for cars when pre-registration activity is at its greatest and predicting when such a time might be is near- on impossible,’ added Norman. ‘So, if you’re unfortunate enough to be disposing of stock at a time when the market is awash with pre-registered cars driving down prices then all your careful forecast calculations could be miles out.

‘I’d argue that the practice of pre-registration could well contribute to higher list prices because, together with discounts, it takes away the pressure to be price-reactive. There is something unfair that company car drivers are penalised because they pay BIK tax on the full list price when in many cases the true value of the car is considerably less.’

Whether pre-registering cars is good or bad for the industry really is open to debate – and let’s not forget this is not a new problem; it’s been going on for years. What is a problem is the current situation with the wider economy and how this apparent positive news, all rather skewed at that, is being reported by the mainstream media.

The MPC, which sets interest rates, has confirmed that new car registrations are taken into account when it is deliberating the interest rate policies – all the more reason to ensure our industry reports the most accurate figures as possible, don’t you think?

Click here to read the manufacturers’ responses to our questions