.

2010-01-22T10:20:00.000Z

In the current economic climate when new cars cannot be relied upon to deliver sufficient revenues and bottom line profitability an effective used car strategy is a vitally important component of dealer, dealer network and manufacturer survival.

Many manufacturers manage their used car strategy through a 'used car programme' where there are varying levels of participation, manufacturer interest and customer recognition. A successful and sustaining used car programme will vary depending on the new car brand but it should always be appropriate to total volumes, vehicle values, customer expectations and the national market.

Using our dealer profiling tool, which allows us to capture and record vital dealer data, including current performance in comparison to manufacturer standards we can provide any motor manufacturer or importer with a clear view of their dealer network sales potential and training needs.

Our dealer profiling tool is bespoke to each country, dealer network or franchise, Some example questions you might like to know are shown here:

* How many used cars do my dealers retail every year?
* How many used cars do my dealers trade every year?
* What is the gross profit per unit my dealers make from retailing used cars - how does this compare to the net ppu?
* What is the average warranty cost my dealers incur?
* Do my dealers make more ppu from trade in's, ex demonstration vehicles, or vehicles they purchase from me?
* How many used car display spaces are there in each of my dealerships?
* What is the average used car stock turn and how does that compare from dealership to dealership and region to region?
* How long does it take my dealers on average to prepare a used vehicle for sale and what is the typical cost?
* How many of my dealers sell used commercial vehicles?
* How many of my dealers trade used vehicles between each other?
* How many dedicated used vehicle staff are employed in each dealership?
* What is the total potential for used car sales within the whole network?

We can provide you with clear and concise answers to these questions and many more to help you appreciate how dealers think, how they operate, the capacity and capabilities that they have, and what they need from you to help them grow profits and margins.

Purchase of BCA by Clayton, Dubilier and Rice

2010-01-06T18:08:00.003Z

With the recently announced purchase of BCA and the stated intention of their new owners Clayton, Dubilier and Rice that it will support BCA as it pursues long-term growth opportunities and expansion into new countries it is worth considering the 'remarketing differentiation' between the UK and Mainland Europe.

When reviewing European remarketing markets it is worth noting that the used car market in the UK is extremely sophisticated and certainly well advanced in comparison to other major western European countries such as France, Germany, Italy and Spain.

In the UK, used cars have been seen as a profit centre for decades, an attitude which is slowly evolving in mainland Europe, where used cars have generally been considered as something of a ‘needs must’ if a dealer is going to sell new vehicles.

Germany has a comparable used car market size to the UK, although if the larger population (20million in excess of the UK) and its history of cross border trading particularly in emerging markets is taken into account it can be seen that the UK is significantly the most developed European market for used car trading.

1) Professional ‘physical’ auctions were first opened in the UK during the mid 1940’s to facilitate the sale of goods and vehicles that had been used in the Second World War. The format of vehicles auctions which had been refined over 40 years in the UK was first ‘exported’ to mainland Europe during the 1980’s when BCA opened their first centre in Holland. Auctions did exist in Europe prior to BCA’s expansion but not in the same scale or with the same processes.

2) Valuation guides were first published in the UK in the 1930’s, enabling all industries allied to the motor trade to use the same guidelines. This facilitated the movement of vehicles as the majority of ‘wholesale’ buyers and sellers were using the same data. Similar guides were not available in mainland Europe until the 1990’s and in emerging markets these guides do not exist today. In day to day business, whilst a valuation of a vehicle is and always will be subjective, professionally compiled valuation guides are a vital enabler in regard to a consistent remarketing market.

3) Almost 70% of all new vehicles registered in the UK are purchased by companies for use by their employees. Many of these vehicles are operated by leasing companies who need large scale remarketing channels to help them dispose of vehicles in a continuous three year cycle. Dealers therefore have regular access to and become reliant on large volumes of used vehicles being available from remarketing companies.

4) VAT – Value Added Tax, the UK government taxation scheme which has applied to used vehicles in the UK since the 1960’s basically levies a tax on a motor dealers profit margin. Until the mid 1990’s the VAT levied on a used car in mainland Europe was calculated as the sale price plus VAT at the prevailing rate – this made the resale price too high and therefore dealers actively discouraged customers from trading in vehicles and a high number of vehicles were sold by ‘private treaty’ therefore negating the need for scale remarketing channels. However due to the large scale of consumer to consumer sales buyers and sellers in mainland Europe were early adopters of the internet a remarketing channel which is very widely used. All European Community countries now use the same VAT scheme as that used in the UK. But with such an active private sale market the need for scale remarketing is much reduced.

5) The UK is unique in Europe in regard to the steering wheel of vehicles being on the right hand side. This means that surplus vehicles cannot be sold across borders but rather it has to be dealt with ‘locally’ therefore a huge remarketing industry has grown to accommodate the vehicle ‘churn’ An average of 2.75 remarketers, dealers or wholesalers are involved in the purchase and sale of a used vehicle between the first and second owner.

David Rathband

European Used Car Consultancy Ltd

January 2010

OCTOBER 09 The Case of the Disappearing Customer

2009-10-21T16:59:00.003+01:00

Without doubt we have seen a period of unprecedented activity in the wholesale and retail used car arena, fuelled by a shortage of vehicles of the right age and mileage added to a retail customer desire to keep the cost of changing their cars to a minimum.
This in turn has lead to many vehicles in the wholesale markets; auctions etc to realise highly inflated values.
Many dealers have reported to me during the year that they could sell almost whatever they could source. All in all a used car industry feel good factor that could be measured at least as an 8 or 9 out of 10.

And then suddenly in late October 09 its all hit a brick wall and it feels like late 2008 all over again!

Enquiries have all but disappeared which prompted one dealer to say it was "more like car snails than car sales" as business is so slow!

Those dealers who have been carried away by demand and have ignored and forgotten that great used car processes will always protect and reward them through good times and bad are suddenly going to get the biggest wake up call of all time as the industry is about to enter a period of used car value re adjustment lead by the fragility of customer confidence and seasonal sentiment.

I would recommend that used car dealers quickly take a long hard look at their retail stock and make plans now to dispose of ageing units and any other stock that is outside of their known best selling stock profile. Not to do so will swallow up plenty of the profits that have been made during the year so far.

Going Backwards to Go Forwards

2009-06-18T12:28:00.007+01:00

When considering the current economic crisis and its effect on the retail motor industry I cannot help but think back to what unknowingly became the birth of great used car retailing practices in the UK following the 'Winter of Discontent' in late 1973 early 1974.

To put today's crisis in perspective imagine what it was like trying to sell new cars in a showroom that was frequently without electricity, when our potential customers were only working 3 days a week and every car owner was issued with petrol rationing books.

I can recall standing in a cold dark car showroom at 4pm in the afternoon with the headlights of the new cars switched on to let passing traffic know we were open for business, we even used a new accessory called hazard warning lights to illuminate the gloom and show our determination to stay in business. O for a scrapage scheme then!

Retailing new cars was extremely difficult but used car sales offered a way forward and many people realised for the first time that if they set themselves up properly to retail used cars there was a consistent and rewarding profit stream to be had.
This pioneering development of volume used car remarketing, forced by the ebb and flow of the economy is the reason that the UK now has the most sophisticated used car market anywhere in the world.

With more used vehicles changing hands every year than France and Spain combined and at least on a par with if not slightly bigger than Germany the UK manages this huge volume of used car activity without the continental outlets (particularly eastern Europe and until the recent past Russia) that the used car markets that these mainland European used car markets can access.

The sophistication of the UK market is underlined by the a startling statistic that once a car is part exchanged by its first owner there is an average of 2.75 wholesale 'owners' (traders, auction houses, franchise dealers etc) before it is registered in the name of the second owner. With well over 7 million used cars changing owners in the UK every year the retail and wholesale motor trade has to be quick thinking, imaginative, speculative and customer focused to stay ahead of the pack.

Think back now to the UK in 1974 and apply the mentality of new car dealers at that time to many franchised car dealers in continental Europe currently, especially those in emerging markets such as the Baltic's and Balkans and Russia. In the recent past they have had tremendous success selling every new car they could get their hands on, but now suddenly that market has gone and it probably won't come back for many years either.

So whats the answer for dealers in Europe at such a difficult time? Get your used car act together; take a long hard look at the UK, adopt and adapt their tried and tested practices and let retail used cars be your salvation.

Retail Practices in the Russian Used Car Market

2009-05-15T16:15:00.005+01:00

WHEN DEMAND OUTSTRIPS SUPPLY

A RUSSIAN PERSPECTIVE

I was delighted to be recently invited to visit a number of motor dealers in the Russian capital of Moscow. In my capacity as an automotive consultant who specialises in all aspects of used cars I was looking forward to comparing the Russian market to those I have recently experienced in the Baltics and the Balkan's where the economic miracle of 5 years ago has in some cases become a motor dealers nightmare.

Given my dispiriting used car experiences when visiting so many new and used car dealerships in continental Europe I didn't expect an awful lot from Russian motor dealers; great new car facilities maybe, but like many of their European counterparts I expected dealers to relegate used car facilities and their customers to the 'bargain basement' and boy was I right!

The used car 'display' in the photograph was outside a reasonably new and huge multi -franchise dealership on the outskirts of the city. I'm not sure this 'display' needs describing but just in case here it is! A collection of dirty, unprepared cars, with large gaps in the line up, no correlation to size or price grouping and certainly no thought for colour mixing either . The cars stood on rough gravel looking totally uncared for. In addition to this display they also had an internal used car showroom - actually it was more like a multi storey car park - which was accessed after quite a long walk past damaged vehicles waiting for repair in the bodyshop up some stairs painted in a very alluring battleship grey and into an area that had clearly been last in the queue when the electrician was fitting the lighting out.

To be fair I have experienced this attitude to retailing used cars in many parts of the world - even in mature markets such as Finland, Sweden, Spain, and Greece - but given the sheer scale of retail used vehicle profit potential in Russia I cannot understand why the motor dealers there who so clearly have the money to invest in great facilities do not grasp the opportunity before them.

Of course right now demand is virtually outstripping supply and dealers can take a trade in and with virtually no preparation easily sell it, without the need for any sort of consumer offer such as warranted mileage, service department check over, cosmetic preparation, warranty etc and they make a decent profit doing it too!

In short it appears that used car buyers expect little and get even less - poor faciliites, no consumer offer and generally damaged and dirty used cars.

The message of this blog is simple, get professional about retailing used cars in Moscow at least and you'll be on your way to your first million in the shortest time possible.

David Rathband

Director

European Used Car Consultancy Ltd - trading as motorvator