Potholes, bad image and a new government are just
part of the brand new world of motor finance, says Peter
Cooke.
Go deeper with GlobalData
Whatever the final outcome will be of the
hung parliament – forced marriage, cohabitation, single parenthood
and a strong possibility of another general election sooner rather
than later – the country still has to face up to economic reality
of a period of probably severe austerity.
While the Society of Motor Manufacturers and
Traders has recently raised its forecasts for sales in 2010, I am
concerned the industry and the motor trade may not escape unscathed
over the next couple of years.
Let’s first take the analogy of potholes.
Has your local authority done an excellent job over
the last few months of identifying winter potholes that require
attention? Certainly they get deeper, but they are now increasingly
becoming joined up, but few are being filled. Just like the
government.
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By GlobalDataFrom the dealer and motor finance points of view,
what are the new business opportunities created by the emerging
period of government cutbacks and austerity which the country is
likely to encounter now we can move on from the LaLa-land of the
general election?
First, the potholes. Local authority budgets are
tighter than ever; road maintenance appears to be one of the areas
where cuts are severe so it is likely potholes will continue to
fester and grow. One result will certainly be further damage to
cars.
Does that mean there is a new business opportunity
for providing ‘spring, summer or winter checks’?
Maybe if the dealership operates in an area of
extreme potholes proliferation there might be an opportunity to
offer either ‘Pothole Damage Checks’, or simply add a line to the
routine seasonal offers of ‘pothole damage checks’.
It costs you virtually nothing and may help hold up
the footfall for service business during the period of
austerity.
Meanwhile, poor economic performance and a period
of austerity may lead to a drop or a plateauing in new car
sales.
Prospects and once committed new car buyers, even
fleet operators, may delay acquisitions, not necessarily because
they are unable to afford the new vehicle, but because of the risk
of creating an adverse image.
Might a positive response to such a situation be to
look to growing used car sales?
Certainly used car prices at auction have hardened
in the last few months, which may suggest a shortage of quality
stock – but it also reflects a continuing demand.
Maybe if buyers are shy of acquiring a new car,
they could be interested in replacing the current car with a more
recently registered used car?
Given the growth in potholes, there may even be an
increasing demand for used 4x4s to be able to navigate over
them.
Greater sophistication in used car activities; more
aggressive stocking and inventory management and market focus need
also be supported by strong and acceptable finance packages for
those used cars.
Some forms of personal debt are dropping quite
rapidly in at present. Used car finance may well be an area where
funding could be expanded effectively to grow the used car
market.
A used car is a new car to its next buyer, even if
it is an old model’ – in times of austerity, there is a strong case
indeed for encouraging prospects who delay their new car
acquisition for non-economic reasons to update – the catalyst for
that updating may well be availability of used car finance.
The author is professor of Automotive
Management at the University of Buckingham
