Let’s get a couple of things straight at the beginning of this article;
- We have no agenda against auctions!
- “All-Auction” policies are not working!
- “All-Auction” policies can never work and will always leave you exposed!
- The auctions will never make a commitment to purchase a car!
- Your franchise partners only have themselves to blame for their current trade disposal problems!
- Looking the other way and hoping things will get better is not the answer!
Now to the crux of this article because the one thing that has struck us as we have delivered used car business development consultancy over the last 6 months, is how many businesses are losing money on trade disposals and have £100’s thousands of pounds invested in trade used car stock at auctions that is going nowhere, losing money and the final irony, they are being charged for storage by the auctions until the car sells.
As a senior professional based at a manufacturer you may reasonably wonder why this should be of a concern to our manufacturer audience. Well unfortunately this situation is decreasing financial liquidity within franchise dealer networks and restricting their trading options for both new and used car sales, not what you as the parent manufacturer wants to see after the bruising first 6 months of 2019 for many of you.
Now, we are the first to recommend that, as part of a suite of trade disposal initiatives, the auctions have their value, (we use them ourselves), but the mistake the industry in the UK has made is in being seduced by the auction companies and then rushing to embrace a very narrow option, in terms of trade disposal.
The consequences of these decisions for your franchise partners, combined with the laziness of those running franchise dealer networks in the UK, (in regard to developing trade disposal networks), were discussed in our recent article The All Auction Policy Of Your Franchise Partners?,,,,, I Bet It Seemed Like A Good Idea At The Time? As much as we don’t want to repeat this article, (those wanting to read the article can follow the link to the article on our Used Car Business Development Blog), the ramifications for the sector on both on a total and macro level, are going to be very costly.
We can understand how easy it was for your franchise partners to have been seduced by the auction companies and we don’t want to repeat our history lesson here; what we want to explore are the problems that franchised dealer networks and their parent manufacturers now face, in terms of continuing to be able to trade; yes it is that serious for many. The flocking to the auctions as the sole trade route for disposal has removed essential used car trading expertise, trade networks, experience and skill-sets from franchise dealer networks and the folly of previous decisions to embrace all auction policies is coming home to roost.
As some of your franchise dealer networks are learning, the auctions Never Have and Never Will give a commitment to purchase a car and write out a cheque for that car as an asset! The auctions will only give you a guide to value, (normally readily available from CAP guide), collect the car, valet it and then put it in front of a diminishing audience, to see if they will purchase the car? If someone does, after a period of time ensuring they have the fiscal advantage, they will send your franchise partners a cheque; on top of this, all this time they are invariably charging your franchise partners for storage! We wonder when this trading policy ever became a good idea.
However, if you are reading this article and you feel this is a “Fit For Purpose” trade disposal solution, then it is not for us to tell you how to run your business or your franchised dealer network, and we wish you both luck because you will need it. With an ever changing market and some very specialised cars being produced, some with no or very fragile used car market demand, (don’t believe the hype surrounding some models and markets), all franchised dealer networks are going to have to be on their toes, when it comes to valuations and avoiding trade losses.
To survive those responsible for running franchised dealer networks must grasp that any commodity, (a car is no different), is only worth as much as somebody is prepared to pay, and this is key; a guide like CAP is just that, a guide, and auctions will reference the past and having been to them a lot recently, we can promise you that cars are not selling in the volumes required. In the near future your franchise partners will be being offered a lot of cars for which there are only a very small number of specialised buyers, if any at all. This won’t be popular with some of you, but electric cars are a case in point; for the avoidance of any doubt the independent trade do NOT want them! They don’t want them because there is little or no demand for these cars in the used car market from customers, so therefore what are they actually worth?
The best couple of hours you, or those responsible for running the businesses making up your franchised dealer network, could spend today is to select an electric car, anyone, it doesn’t matter, (select one off the internet if you want), then call the associated franchise dealer networks to try and get a commitment to underwrite and buy the car! This commitment is important because you can’t trade with, and bank opinions!
I’m sure that the trading reality will shock you and anyone wishing to call us after this exercise for a free consultancy consultation can feel free to do so. And before you think we have a grudge against electric cars, we don’t, we are running used car stock acquisition companies supplying used car stock to independent and franchise dealer networks ourselves; if there was an opportunity and money to be made in this market, trust us, we would be expanding into this market at breakneck speed!
The reality is that your franchised dealer networks need to build the trade disposal networks required to be able to trade in the markets and trading conditions that are going to be prevailing over the next few years, but this will take time and a lot skill and expertise; the skills and expertise for which are missing from many franchise dealer networks at the moment.
Luckily help is at hand; if this post has resonated with you and you would like to know more about our used car business development consultancy programmes, especially our Used Car Stock Disposal Master Class And Mentoring Programme, because you would like to partner with an organisation of professionals who are trading in these specialised markets themselves and have faced the challenges of fast paced evolutionary used car markets, then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. Those wanting to discuss our Used Car Stock Disposal Master Class And Mentoring Programme, and how we can build the used car stock disposal initiatives required, to ensure that your franchise partners can continue to trade profitably whilst others don’t; or wish to have an exploratory conversation regarding our expansive range of services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call me on 07796 260261.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
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