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Big Mike: Could the bottom fall out of the used car market?

Time 9:13 am, June 27, 2017

I WAS talking to a mate of mine the other day, who, despite his best intentions, is still stuck in the world of new car sales.

I say stuck, because to the likes of me, selling new tin was never that much fun. I did it for several years, for Fiat, for Austin-Rover and for Citroen (which may explain why it was a tough old game, given where those brands were in the 1980s), but at least it was a level playing field.

For me, though, the fun is in buying the cars – the excitement of the bargain and the visualisation of the profit you’ll make off the back of it.

Selling new cars just isn’t the same adventure.

And, according to my pal Geoff, it’s even tougher today. Online purchasing has changed everything.

Back in 1988, when I was peddling Citroen BXs, your typical buyer would be about 50 per cent of the way down what car manufacturers like to call the ‘purchase funnel’ (believe me, marketeers love that phrase) before they walked into your dealership.

They’d have started off with a copy of What Car? and would have read a few comparative road tests. They’d have scanned the spec tables, and drawn up a shortlist of maybe three or four cars that would suit their needs. The next step would be a tour of the local dealerships – Ford if they wanted a Ford, Citroen if they wanted a Citroen and so on… multibrand sites were few and far between back then.

From a salesman’s perspective, then, the very fact they’d crossed your threshold (or become ‘footfall’ in marketing bullsh**) meant they were at the very least a hot prospect.

They’d walked into your showroom, they were clearly in the market for a car and they were properly set up for you to ‘convert’ there and then, if you had the gift of the gab and (ideally) a chunk of the car manufacturer’s own money ‘on the bonnet’ with which you could play discount tennis.

According to Geoff, though, things are very different today. First of all, manufacturer incentives are often volume related – you get your bonus if you flog enough cars, not as a negotiating tool per se, which is why we see so many pre-registrations.

A nice cuppa

But worse than that, the internet means that people shop around before they even come to the dealership.

They know what they want and from where they can get it, they know how much it will cost, and whether they want to buy it new or nearly new (where those lovely pre-regs can bite dealers on the bum).

Geoff’s role these days is often to make these ‘prospects’ a nice cuppa, while they go out for a test drive in his bought-in, paid-for demonstrator to reaffirm the decision they’ve already made, only for them to then bugger off home with a nice shiny brochure to place their order for that exact same make and model on a pre-registered example from halfway across the country, the deal sweetened by said dealer chipping in for their train fare to collect.

It works for me, as often these deals are concluded with no part-exchange, meaning I get a better run at the classifieds than I ever did before, and a much better selection of ‘must be sold due to new car’ bargains.

But for Geoff, it’s soul destroying.

He works hard, lives off his commission but is constantly ‘in the bucket’ with his employer – a car trade term meaning he’s already borrowing against next month’s commission, just to make ends meet.

I, meanwhile, am enjoying something of a purple patch thanks to the quality of used stock there is out there at the moment, often as a result of this buying culture. My stock might be older than average and my lot a bit ‘backstreet’, but it’s a nice little business.

But my fear is what happens next.

Folk like Geoff are keeping what custom they can by tying customers into PCPs, and with the UK having a dreadful ‘keeping up with the Joneses’ mentality, that shiny new piece of metal on the driveway for £279 a month is hard to ignore.

But once you’re in a PCP, you’re in it for keeps as it’s so expensive to get out. That’s good news for Geoff, but it means the bottom could be about to fall out of the used car market, especially when these cars get to their second or third ownership cycle, where they’re too old for anyone to consider as a status symbol.

And as more and more people tie themselves into monthly payments, which are often not far off the loan repayments I could get them on a more straightforward hire purchase scheme, I can’t help but feel 
a bit exposed…

Who is Big Mike? Well, that would be telling. What we do know is that he’s had more than 40 years in the car trade and picked up some incredible tales along the way.

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Car Dealer has been covering the motor trade since 2008 as both a print and digital publication. In 2020 the title went fully digital and now provides daily motoring updates on this website for the car industry. A digital magazine is published once a month.

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