Whether the government accepts it or not, the automotive
industry is at, or at least pretty close to, economic downturn and,
at least at the time of writing, the situation is exacerbated, as
is the housing market, by unnecessary dithering with regard to
taxes – stamp duty on house sales; differential and retrospective
VED on cars.
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Recent forecasts have been sunk below the waterline. I recently
went to trade my three-year-old 45,000-mile estate car; the dealer
offered me, for a sharp car, £1,500 less than the guaranteed
repurchase from the OEM’s captive finance deal for the car. The
message is clear: what would have been anticipated to be a good
used car three years ago, presumably with every likelihood of
selling quite quickly, is now an absolute bargain.
The challenge for the dealer is to turn that type of absolute
bargain into a profitable sale – or, at worst, a sale with a
margin.
Are we, like the government, in a state of abject denial,
claiming the economy is A-OK, really – or could now be the time to
tell the truth and shout from the rooftops that car retailing is in
a parlous state – but there are more brilliant bargains than you
could ever imagine available?
Is it not one of the stratagems of many a great entrepreneur
that you do the opposite to the rest of the market? Could this be
the time for such action by the forward thinking, entrepreneurial
dealership? Certainly I would not advocate going over the top,
regardless – but I would suggest thinking outside the box:
challenge traditional products and attitudes and see what new
emerges.
The present recession by any other name would appear in part to
have been brought on by a credit crunch underpinned by sub-prime
lending – yet there are sub-prime lenders in the market doing
better than many conventional players because they have tight rules
and know what they are doing.
Reasoning process
Why are prospective buyers not buying at present? Is it because
they are short of liquidity, worried about escalating fuel and food
costs – or worried about their ongoing employment?
Might such malaise suggest they are being offered the wrong
product? If they have traditionally bought a new car, might now be
the time to offer a nearly-new or even a used car to match their
aspirations at a lower price?
Have they stayed at home this summer rather than going on a
foreign holiday? Might they be cheered up by having a replacement
car – but perhaps too cautious to buy a new one unless they traded
down? After all, a new car is only new until the family dog has
initiated it by weeing on all four wheels.
Might the would-be buyer be concerned that the bank would reject
a request for a loan for something as frivolous as a replacement
car?
How can the dealer counter such misplaced logic? The answer
might just be by pushing ‘the ultimate bargain’ – a car at a
bargain price to recognise amazing trade-ins plus point of sale
finance. Add the warranty, if you see fit, and build a total
package. We will do it all for you. Increasingly the vehicle market
is becoming a financial services product – never more than now.
Finding buyers
So, who might buy? The dealer has prospect lists for new and
used cars; you have profiles on a lot of those prospects; you have
names that have contacted you by email. Would it be possible to
identify groups of potential buyers who may be slightly less
concerned than other by the current economic downturn?
Identify those groups: set yourself a template and subject every
name and contact in the dealership to a rigorous analysis. You will
surely find an A-list – pursue them. From the feedback you will be
able to build a B-list of prospects.
Call them, email them, write to them, tell them about the
bargains – and be honest! They are being offered a bargain against
the trend because you want their business.
Certainly a single swallow does not make a summer, but a
clutch of extra used car sales might ensure the swallows have
somewhere to come back to next year.
Professor Peter Cooke, KPMG Professor of Automotive
Management, University of Buckingham
