New vehicles in stock and ready to go…not a great story!

Whilst new car sales are slightly ahead in July by a little over 2%, the year on year picture still shows sales down by 550,000! The challenge now is as the first signs of recovery are felt by businesses and individuals that the market has changed. When the financial crisis bit half way through 2008 motor manufacturers quickly and drastically cut production. Any and all stock on the ground was quickly liquidated, by various stock bonuses and incentives to dealers and fleet suppliers.

 As with all actions there is the inevitable opposite reaction and as an industry we now find ourselves heading into the important September plate change market (59 Reg) with far few cars available for registration than the market requires.

 The manufacturers all close their factories in the summer holidays. The most inconvenient time for Great Britain but perfect for continental Europe. Why you might ask when we in Britain are such an important market. Its simple take a company like VW, making nearly 5M cars worldwide, believe it or not 4.7M are left hand drive. Only 150,000 at best arrive on these shores!

Why has the market changed? and how does this affect the UK market?

Firstly manufacturers will not  increase production to anything like previous volumes whilst working capital is so difficult to raise on the money markets and any signs of recovery are fragile and vunerable. Secondly the basic law of supply and demand will be seen for once to work in their favour. Or put another way a seller can sell his product for a better price if it is perceived to be scarce. By default no production, scarcity of stock and a more bullish view is taken by the seller…

This is a position the manufacturers will try to protect using all their considerable might. So how does it affect the Fleet Buyer/SME/Man in the street? Firstly the large Fleet buyer will face a number of challenges, Reduction or removal of incentives/discounts, some manufacturers will turn their back on the business, Banks are strategically walking away from none core activities as i have previously mentioned.

For the SME a similar picture on a smaller scale with the added complication that smaller businesses have been harder hit in the credit crunch so a good number will struggle to raise any sort of finance, a story mentioned frequently on the news.  

Individuals, Directors and employees opting out of company cars, same as all of the above. A small stimulus in the government Scappage Scheme. For a reality check on this program there have been a little over 157,000 units sold under the scheme this year leaving the potential for another 143,000. If we consider the new car market for this year will be 1.8,1.9M estimated it means that around 17% of all cars registered during the scheme will be to people who until recently were driving a 10 year old car they had owned in their name for a year..Question how many of your friends and colleagues fall into this category? I would venture not many maybe 1 or 2 in your whole network.

So what can you do to make the best of this situation?

A few simple hints and tips. News in today from Fleet News states if your business owns cars upto nearly 1 year old and decided to sell them for cash at Auction those cars would make £2,200 more this August compared to last year! Businesses owning cars in this category could theoretically sell and lease a replacement with two instant benefits. firstly the lease arrangement could have significant tax benefits, secondly the company selling its fleet of say 20 vehicles could raise a significant amount of required working capital. Avoiding the difficult conversation with bankers or expensive property re mortgages if the buildings still have any equity…

We are keen to talk to businesses with fleets of 10 or more vehicles to discuss some great ideas for saving money like the above, reducing tax, increasing fuel efficency and reducing CO2… For an informal chat and more information our FREE Fleet Audit talk to Paul on 0845 373 5368.

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