every negative there has to be a positive if you look very hard.
The used car industry is a case in point.
Our great leader, Gordon Brown, has likened himself to Brontë’s
Heathcliff, of Wuthering Heights fame. Others have amended that to
Dithering Heights. Dithering suggests uncertainty, and uncertainty
means opportunity to those with a clear vision and willingness to
act now.
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Used car prices have crashed, especially for less fuel-efficient
vehicles – luxury cars, 4x4s – and dealers are finding themselves
with apparently difficult to sell units at real bargain
prices.
“Nobody wants them – they’re too expensive to run.” Is that a
cry of defeat, or a lack of imagination? Is this an opportunity to
introduce a more sophisticated approach to selling used cars? It
could be the time to talk to that would-be buyer, staring
misty-eyed at the used vehicle he always wanted, at a price he
might now be able to afford – but scared by media reports of $200 a
barrel oil, £2 a litre petrol and impossibly high, punitive,
retrospective VED for owners who dare seek a little luxury.
Might now be the time to introduce a little rationality back
into car sales? It has been suggested by greater authorities that
in good times, a car to a man, is seen as a penile extension while
to a woman it is an extended handbag. However, in times of economic
downturn, maybe one should decouple from fantasy and re-engineer
the car – particularly the used car – as a rational economic
investment decision.
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By GlobalDataWe are not talking rocket science, merely asking the salesperson
to engage with the prospect, to ask meaningful questions, to
listen, and to make a rational economic case.
Is prudence overrated?
In these straitened economic times, prudent used car buyers have
a budget, whether scribbled on the back of an envelope or in the
mind. Today, prospects will also be much more aware of the running
costs – fuel, service, maybe not; VED – certainly. They will also
have an idea of their annual mileage and how long they plan to keep
the car.
Given that information, the salesperson has the basis to do a
broad brush total cost of ownership comparison with the prospect.
If the annual mileage is low, there might well be a case for
offsetting the potentially much lower than historically initial
price of the luxury used car against the relatively higher
incremental fuel and VED costs. A £1,000-£1,500 drop versus the
historic used car price can go a long way to covering the
potentially incremental fuel cost and higher VED over two to three
years above the cost of the ‘sensible car’.
Some political insiders feel we might well expect a dizzying
collection of U-turns regarding the autumn 2p per litre price hike
and punitive proposed VEDs, as the Master of Dithering Heights
seeks to cling to power, and there is no guarantee the price per
barrel of oil will stay as high as it is today.
Calculate, with the would-be used car buyer with a low expected
annual mileage, what might be the comparative cost between the
luxury used car they had always wanted with the prudent used car
they feel they ought to buy; if needed, go through your records to
see who else fits the same profile.
Yes, there will be a difference in total costs over two to three
years between prudence and luxury, but, you could argue, when will
be the next opportunity you have to acquire a luxury used car with,
over a couple of years, a surprisingly modest incremental cost per
month?
The second powerful weapon is access to consumer finance – the
credit crunch means banks are stricter on what they will lend. Does
the dealership have in place a strong point of sale finance
programme which is both understood and actively promoted by the
sales team? The ability to be able to offer a bargain luxury used
car with a rational total cost profile to the would-be buyer,
coupled with an attractive finance package, may well help the
dealership stand out from the competition.
Such a ploy is for a tightly defined market segment – but it’s
there if you look hard enough. Yes – conscience will favour
prudence. But look at the mess that Brown’s “prudence” has got us
into.
If the economy is going to hell in a handcart, then the customer
should go in style!
Professor Peter N C Cooke, KPMG Professor of Automotive
Management, University of Buckingham
Motor Finance Issue: 45 – July 08
Published for the web: July 25 08 15:44
Last Updated: July 28 08 12:21
