What will happen to the car market in 2010?

Starting a used car business in 2007 was like opening a tanning salon in Pompeii the day before a few natives started to wonder why, after a giant plate of pasta, they thought they could hear their stomach's rumbling.

However, despite the very challenging trading conditions we turned a profit. 2009 has been rewarding as we have learnt from painful mistakes made in 2008 and the market has returned in force.

So having experienced the euphoric highs and depressing lows, what on earth is 2010 going to throw at The Internet Car Lot?

The market starts with new car sales.

The scrappage scheme is forecast to run out of funds in February and there is no sign yet that the Government will extend the scheme. Despite the end coming close to election time, with Government spending likely to be the key campaign issue, throwing money at shiny new cars could be difficult when so many cuts are likely in public spending.

VAT returns to 17.5% and there are many (myself included) who thinks it could rise to 20% post election. As VAT is payable on all new cars this will add further cost to the price of a new car.

The weakness of the pound has already seen Daihatsu pull out of the UK car market and most manufacturers have implemented price rises through the course of this year. Whilst there a number of manufacturers who build cars in the UK, only certain models (with the exception of JLR and MINI) are positively affected with the majority still coming from primarily the Eurozone.

Therefore I think we will see a very tough new car market and one which will be under severe financial pressure. I was speaking to a German manufacturer dealer principle yesterday and his 2010 target is the same as this year so I am concerned some car makers will be in for a shock.

Lest we forget that the forecast for the 2010 economy in general is not good. The term 'w-shaped recession' is being bandied about regularly and it is difficult to argue against given economic data.

So, how will that affect us?

Positively I hope and using common sense there is no reason to be doubtful.

There is still no overall surplus of used cars. The majority of registrations in 2009 have been genuine retail or business customers, not hordes of pre-registered vehicles like we saw in 2008.

Dealers do not have the funding levels available for pre-reg to be openly available and as discussed already, many manufacturers will find it too costly to support this form of marketing activity.

Many people may be dissuaded from a new car if the average new car price rise is as much as 5% so may look for value in used cars instead.

In summary there is no way that cars will rise in price like they did throughout 2009 but I think it is fair to say the prices will remain very consistent.

Jamie

Banger for your bucks...

In addition to the hordes of three year old Ford Foci (is this the correct pluralisation of a Focus?!), German machinery and other fine motoring specimens that you find on http://www.theinternetcarlot.co.uk/, there is another - dare I say it - almost dirtier side to our business.

Before you ask, nothing illegal, nothing sinister and certainly nothing that would involve a visit from those splendid civil servants at HMRC.

I am talking about the world of the 'banger'. To me, a 'banger' can be defined as a car which may be old or mechanically infirm but is definitely cheap.


We generate many cars in part exchange which fall into one if not all three of those categories. In order to maintain good relationships with franchised dealerships, we also take many of their cheaper cuts. Think of us as a Hilton hotel with a youth hostel in the basement.


These make there way either to http://myworld.ebay.co.uk/internet-carlot/ or through a 'spares/repair' advertisement on Autotrader.

Many dealers do not relish getting involved in this end of the car market but I - as has been said by many - am different to the rest.

My affinity to the banger started in 1998 when I joined the trade. As a reward (sic) for working many long hours, the sales manager agreed to let me use whatever delightful beasts we had lying around the back instead of using my own car.

One of my best mates Alec was already into this form of car buying. Recently he bought a 1985 BMW 316i for £800 from a man called Cheeki who lived in Wembley. The two hour journey to go ten miles on various TFL services meant he was somewhat committed to the purchase before he arrived. On the test drive Alec noticed that the speedo was not working. 'Cheeki', he said, 'how do you know how fast you are going?' Alec enquired, 'I imagine.' Cheeki replied casually...


I drove some serious sheds that summer including a Rover 820i that broke down as I put it back in the compound to such an extent that it had to be scrapped the next day, but none of them let me down......significantly.......or at least at rush hour.


When I worked at BMW, I often left my company car behind so that I could drive the 30 miles home in one of our part exchanges. You could say it was like choosing the Golden Girls over Girls Aloud.

The difference between then and now is that the bangers are ours and as a result I get more pleasure from the experience.

Yesterday I bought a 1998 (R) Mercedes C220CDi estate in doom blue (read 'the money of colour' post for a description) with dark blue cloth. It has only done 203,000 miles and is as square as Gordon Brown. OK, so an atomic cloud appears every time the old girl fires up but when she is running she purrs like a kitten.....with asthma. OK, when we are driving the dash is lit up like Oxford Street at Christmas but none of those warning lights are severe enough to worry about. It would be bad form to disclose how much I paid for her but suffice to say in true motor trade fashion it involved a small hairy primate.

Searching for the perfect banger is like searching for the perfect partner. You have many bad dates but keep coming back for more. To push this woeful metaphor to the dangerous edge, you could describe me as having Mormon-esque values when it comes to bangers.

The banger allows you to scratch any motoring itch. £1000 can buy an old MR2, a classic (although no doubt rusty as an anchor) Mini or an old Landie, the list is endless.

So am I here advocating that everyone should save their hard earned money and go and buy a banger?

No and not just because I sell some more expensive cars.

The banger can be a fickle friend.

Many are the time I have been stood up in a pub with a pint in my hand by a banger. Many are the times I have lent the banger some money only for the banger to disappear. Many are the times I have gone on holiday with a banger and we have fallen out.

You get the picture.

I am a great friend though and cannot help coming back for more.....

Jamie

Remember remember to buy in November

Sometimes you cannot help when you need to change your car.

The sight of people stranded by the roadside with their arms folded staring demonically at a hazard light flashing car is not uncommon.

Exasperation leads to the purchase of a new car. Ironically in most cases it follows a large bill to fix the catalytic problem which in our experience rarely manifests itself again but once that seed has been sown it is very hard to ignore.

There is also the circumstantial need. A lady with a bump, a set of L plates and a puppy are all welcome sights at any car dealership as these are sure signs of a new car requirement.

Emotional factors conspire to drive (excuse the tacky pun) other people to a car change. I once sold a Rover 216i cabriolet to a couple on a glorious Sunday morning. Not unusual in itself but the fact they were wearing paint splattered overalls, had a car full of paint and the fact our dealership was next to Homebase suggested it may have been something of an impulse purchase.

Some people however have the steely resolve to look for a car when they feel the market is ripe for the best deal.

It was often considered that the best time to buy a car (new or used) was in August when dealers were chasing new car targets and many more used vehicles hit the market. The motor trade forced a change eight years ago to March and September plate changes so the significance of these dates has been reduced.

I now believe November is the best month to buy a used car specifically. Why?

Primarily it seems the retail public hide away in November. The looming expense and lack of holiday before Christmas has a massive impact.

The seasonal change of reduced daylight and colder weekends can also affect the psychological prospect of going to examine used cars.

The supply of used cars increases as many large fleet operators and dealer groups try to reduce stocking levels before year end so the disposal process starts in November.

Manufacturers are starting to review their year activities and pressure is applied to their dealers to hit targets which has a knock on affect to their used car buying activity.

All of these factors outlined above conspire to force an abnormally higher reduction to both wholesale and retail prices alike.

Be warned though, mid December normally heralds a return for car buyers as they reconcile their Christmas expenditure with the purchase of a new car.

Many savvy dealers are also very active with purchasing as they aim to counter the strong wholesale prices often seen in January so supply can dwindle.

Jamie

The Money of Colour

I was recently asked to help a friend who was choosing his new company car. The car of choice was a BMW 320d touring and as a result the budget the company provided left little room for any additional specification. We debated all manner of optional extras but the most contentious of them all was the colour.

The gentleman in question lives in Paris and any reader who is familiar with the French capital will know it is essentially a giant banger race. There are no need for reverse parking sensors in Paris, when you hit the car you are parking next too you stop and go forward!

The 'discussion' centred around his desire for metallic paint and the opportunity cost was an i-Pod connector. 'Why have metallic when firstly it is not your car and secondly half of it will be lying on the Parisien pavement in six months?'.'Because it looks better' came the reply.

It got me thinking about the emotive nature of colour when applied to used cars and trying to quantify how much someone would pay for the 'right' colour?

Of course, early used car salesmen had it easy. 'Yes madam, come and look at our approved range of Model T's.....'

Everyone has a favourite colour for a car and certain cars look fantastic in certain colours. There are colours which possess a timeless air and some which go out of fashion faster than a shellsuit.

In my opinion dark blue, British racing green and black have always had an air of sophistication particularly when coupled with a light leather interior. However, ask some people their opinion and dark blue or green cars are owned by people who are prospected by Saga and black cars are owned by people who have served time at Her Majesty's.

For the last ten years silver has been the most popular colour choice amongst motorists. The major benefit of silver is an ability to retain an air of cleanliness despite being dirty. It is also a colour which does not really offend, the Gary Lineker of colours if you will.

Kent constabulary started the trend of ordering police cars in silver to try and attract better residual values. With some degree of irony, of late many people in the trade have been adopting terms more commonly seen in haute couture by saying white is the new silver. It must be noted that white used to be very popular (and always has been in North America) and silver was the new white, so in essence is white really just the new white??!!

Brown is definitely a colour that we Brits seem loathed to adopt. When I was at Saab we had a colour called 'copper bronze' which needs little description. I tried to find a picture of the colour on Google but in testiment to the popularity of it I was unsuccessful!

This brings me neatly on to names. I was recently driving back from Exeter when I saw a new MINI is the most disgusting colour. Whilst talking to a sales manager from a MINI dealer I asked him why on earth MINI had launched such a bad - in my opinion! - colour and what was it called? 'Interchange Yellow' he told me. If anyone knows why answers on a postcard...

There are a number of unofficial trade names for colours. For example dark non metallic blue is known as 'doom' and bright red is known as 'dog ****'. The best I have heard applies to VW and and the Lupo in particular. When attempting to describe the light green to a trader he stopped me mid flow and said 'I know the colour, kermit...'

In summary, colour is always a matter of personal choice and with regard to used cars, no matter how horrible it may seem, someone bought it once and someone will buy it again but trying to ascertain the worth of a colour in financial terms seems nigh on impossible.

Jamie

Scrappage - Our opinion

When the scrappage scheme was launched after a period of sustained lobbying from the RMIF and SMMT, I thought that it was too weak and lacked the teeth to prompt private buyers to return to the new car market.




Now the alloted funds are dwindling it would appear that it has had the desired affect and created new retail sales more quickly than anticipated. The question is sure to be will the scheme continue?




There are figures quoted in many trade publications that the scheme has actually created a surplus of tax relative to the subsidy, so it would seem that it should be an easy decision for Government. I would anticipate any announcement to be made as late as possible in order for the public relations machine to be more effective.




The manufacturers of smaller cars have naturally seen greater benefit as it is easy for someone to see value in what is in essence a £2000 reduction on a list price, the advert for the Fiat Punto at around £5k certainly raised my eyebrows.




It seems a shame that lots of serviceable cars which fill a great need at the lower end of the market have been broken for parts but in order to avoid system manipulation and for the Goverment to keep their green angle this could not happen.




The final year registration figures from the SMMT will no doubt be dramatically less than last
year but will be better than without scrappage.




Jamie

Our cars reach far and wide!!

There has often been a worldwide market for many unusual, exotic and classic cars but the nature of our recently depressed used car market and weak pound have meant a lot of cheaper cars have been disappearing from this country.

Yesterday we sold a ten year old Jaguar S Type 4.0V8 that had done 126k, had one previous owner and a new MOT on eBay for £1710 to a chap from Hungary who intended to break it for parts!!

It got us thinking about all the cars in the last two years that we have sold for export.

We have sold a number of immigrant workers cars like a £200 Peugeot 406 which they came all the way from Middlesbrough to collect!

There was the 25 year old immaculate left hand drive Mercedes 300 which made it all the way to a new owner in Italy.

We sold a high mileage BMW 528i SE to some interesting characters from Tblisi in Georgia who intended to convert it to left hand drive and sell it on. Sadly for them they engaged first gear instead of reverse on their departure and the corner of the car was a bit flatter than before their arrival.

A number of cars have gone to Africa including a Toyota Rav4 to Tanzania, a VW Passat Estate to Ghana and a high spec Mercedes E Class to Algeria.

The strength of the Euro has also helped European buyers with right hand drive like Ireland and Cyprus. These buyers seem particularly fond of older Mercedes diesels.

Ultimately we do not mind if the car goes to Exeter or Eritrea as long as the new owner is happy!

Jamie

Its our birthday!!

The Internet Car Lot turns two years old on the 1st of September and we have certainly learnt a lot in that time!

We started the business as the economic climate was really starting to degenerate and up until November last year we were operating in a market where the supply of cars was much higher than the retail demand. This meant that we could only stock a car for a very limited time before all the profit was lost through natural depreciation.

Ever since November the complete reverse has occured where the supply of good cars for retail has been limited and demand has outstripped that dwindling supply. This is why the value of used cars have increased by significant amounts compared to this time last year. Whilst this market is better for the trade and retail customers alike, it means that finding cars at a level which is still attractive for the customer yet retaining a profit for us has been very challenging.

Manufacturers have not been pre-registering cars in any number and the fleet operators have been extending leases as opposed to writing new business so it is no surprise that the new car market volume is so much less than the previous years. This then naturally affects us as a used car business as we have a lot less cars to coming through the system.

We are very excited about the propects for the next financial year as the economy looks more stable (although still not as bouyant as some political figures would suggest) and the car market looks to have weathered a very severe storm!

Jamie

New Website!!

Like a conventional shop owner painting the front of their store, we felt after two years that the website needed a new look.

A few people commented that despite the aesthetic appeal of our last black background, it made the car text somewhat difficult to digest. We hope the move to a lighter design makes for a more functional site.

We now have a sell your car section. This is as a result of the chronic stock shortages that the motor trade has suffered since December 2008 and will hopefully help people get an idea of their car value even if they decide not to sell it to us.

The only other new feature is this blog. Our physical intangibility means that we need to embrace any opportunity for providing a cultural flavour for our company and hopefully weekly blog posts will do this.

We hope you like the new site, feel free to make any comments on the blog but naturally anything which uses foul and abusive language will be removed. We are however brave enough to leave any constructive criticism!!

Jamie