Who’s Really Affecting The Values Of Specialist High Performance Cars?,,,,,,
The specialist high performance used car market is already seeing prices come under pressure and I predict that from 2023 onwards this market in the UK (both new and used cars) will see prices come under pressure like never before; and for reasons many will not appreciate.
In truth there are many negative “Drivers” battering the market at the moment, but the most important factor, in terms of successful and profitable retailing and therefore the protection of residual values, (thus the customer’s monetary investment), is the levels of experience and expertise residing within the manufacturer themselves and their franchise dealer network. This more than anything else, will dictate levels of retailing success and the cost of ownership for customers trusting these businesses with their money.
Sadly though the trading evidence suggest that not many manufacturers and franchised dealer networks operating within (and retailing products in) the specialist high performance market, have got the professionals required to do so successfully, thus protecting residual values and therefore the investments being made by customers.
One of the worst (and baffling in equal measure) examples is the current trading narrative surrounding the BMW M5 in the UK, and what that then means for a customer(s) looking to dispose of one today, a business trying to retail them, or a customer looking to purchase one; who (by the way) are the only winners in the current trading landscape, providing they have access to the market knowledge required.
And this negative trading narrative for the BMW M5 is not new; I have already explored the trading environment for this car before, in the article below which I wrote in June for my Used Car Business Development Blog;
But first some history regarding this remarkable car, and one that is being undermined by both BMW (GB) Ltd themselves and their franchise dealer network in the UK. First launched in 1985 the M5 was a ground breaking car; the world at this time had never seen a car like it, is was a genuine game changer and I can remember selling the first two incarnations whilst working within the BMW network, and then selling all of them through my stock acquisitions business.
In truth, and opinions will no doubt be divided, I still think the BMW M5 is the best car in its class, so for me, seeing the ownership proposition undermined by the BMW network itself, is puzzling albeit not surprising; why? Well because this is what happens when you don’t invest (both as the manufacturer and as a franchised dealer) in the professionals required to sell and then reacquire to sell again, a specialist high performance car like the BMW M5.
So let’s explore this and look at the current trading and pricing narrative surrounding the M5 in the UK; to do so, let’s imagine that you had contacted me to sell your under 12 month old example. During our subsequent discussion and the process of valuation, (before then making a formal offer) I would begin by exploring the market trading reality, when it comes to availability, because this determines desire within purchasing audiences (both end users and the trade) so therefore prices.
Now in the UK we are lucky (or unlucky depending on your point of view) to have easy access to the market trading reality, combined with a snapshot of real time and actual trading performance, including pricing. So for the benefit of this article I can declare that the screenshots being used were taken on or around the 22nd November.
When looking at values of new and nearly new cars (those up to 12 months old) the manufacturer and the expertise contained within the franchised dealer network, always sets prices. Their trading behaviour (which is dictated by their level of expertise in both the associated new and used car markets) creates a trading narrative that then dictates the actual new car price, which is where we must begin. And unfortunately for BMW (or any manufacturer for that matter) the trading narrative surrounding any product is only as stable and/or strong as the weakest link in their retailing network.
The screen shot below (taken from Autotrader – what new M5’s are doing, being advertised at a discount on a platform like this, is article on its own) clearly proves that the starting point for the pricing of a new M5 is £93,797:00; the car shown was the cheapest of the 9 new BMW M5’s being advertised on Autotrader that day.
Now this is very bad news for anyone believing the (understandable) hype surrounding the car and who paid the list price of approximately (depending on the specification) £111,365:00. The dealer below has just cost you (at least) an additional £17,568:00 in immediate short term depreciation.
Unfortunately this situation then makes a mockery of the BMW franchised dealers trying to support the product in the used car market. A search on the BMW Approved Used Car Locator on the same day lists under 6 month old versions being advertised for as little as £94,995:00, please see the screenshot below.
In truth, those skilled in acquisition should be purchasing a new M5 for no more than £90,000:00; at least £21,365:00 behind list price. So what does this mean for the values and likely retail prices of the used 5 month old examples in the screenshot above? Well ask yourself a question.
If a new M5 can be bought for £90,000:00 (and it can on this evidence) how much of a discount on this price would the 5 month old example require, in order to make it price competitive; in relation to a new car? Well one things for sure, it can’t be more expensive than the actual price of a new car, in that moment, and if new cars are available in volume.
In my opinion, if the actual purchase price (at the moment and in this market) for a new M5 is £90,000:00. From here the knock-on effect for the values and sales prices for the 5 – 12 month old examples is likely to be very difficult for those having them in stock, or trying to dispose of them, to stomach.
Personally, if I was a franchised dealer with an example in stock, I would not be advertising the car anywhere (more on this strategy in articles to come), because it is only adding to the problems in the UK market for M5’s.
I would though be aggressively offering the car within the right (socioeconomic circles) and selected target audiences, expecting to get no more than £80,000:00 but willing to take £77,500:00, depending on the market knowledge of the customer eventually buying the car. Something that looks realistic, if a little “Ballsy,” especially when you see the further screenshot taken from the BMW Approved Used Car Locator below, showing 1 year old M5’s being advertised for as little as £69,998:00.
So where does all this leave the customer with a 6 – 12 month old version to sell, because they need to reduce their financial exposure; a common event in markets being driven by the economic trade winds battering markets at the moment? Well in a hole, that’s where.
In truth (when it comes to valuations) the M5 market is an interesting one, because in many ways the distressed sales message doesn’t make any sense. Unlike other specialist high performance saloons (the Porsche Taycan for example, where there were over 200 for sale on the Porsche Approved Used Car Locator – far too many for the likely demand in this new and in many ways overhyped market) there are only 28 up to 1 year old M5’s available for sale on the BMW Approved Used Car Locator. So the irony is that the car is actually in short supply; so why the distressed selling message?
Anyway let’s put all this into context, in terms of the used car market for BMW M5’s and the disposal values owners of one year old M5’s are likely to receive? Well for a car similar to the one above, it will be £60,000:00, which equates to a depreciation rate in first 12 months (if you were naive enough to pay list price – but sadly many will have) of approximately £51,365:00 or 46%.
This is an astonishing rate of depreciation for a specialist high performance car, especially one that appears to not be available in any great volume; new cars aside. In my opinion both the manufacturer and the BMW franchised dealer network should be ashamed of themselves. Be in no doubt trading narratives like this only happen when those lacking the expertise and experience required, to start retailing and handling specialist high performance products, become responsible for the retailing strategy. Quite frankly I am astounded.
Most disappointing of all is that this trading narrative is so easily changed and turned into a positive, both for owners, retailers and residual values, providing that is, that the used car retailing, acquisitions and business development experience and expertise required, is in the business. Sadly for those owning specialist high performance cars like the M5 (those losing the astronomical sums involved) this expertise is looking to be in short supply at both BMW (the manufacturer) and within the BMW franchised dealer network; and just at the time when it is going to be most needed.
In truth though, this problem is not BMW’s alone, the entire specialist high performance used car market looks over supplied to the point of overheating. With stock everywhere and a noticeable lack of relevant and essential expertise, private sellers and retailers of specialist high performance used cars are about to experience “Actual” prices coming under further duress.
Despite enjoying growth upon growth over the last decade, the specialist high performance market looks massively over provided for at the moment; we have an abundance of £100K plus SUVs, saloons and sports cars, the volume of which will make the retailing challenges substantial for sellers; as the market struggles to find enough customers.
That said, for those looking to enter this market and with access to right expertise, these cars will never have been so cheap. As much as all commodities markets can be bruising for sellers, all markets create winners and losers, and the specialist high performance used car market is no different. In the markets conditions to come, the winners will be savvy and well informed buyers, those with access to the expertise required to ensure that they are entering the market at prices previously only dreamt about.
Take the year old M5 in the screenshot above; now this represents tremendous value in isolation, even so I would wager (on the evidence I have seen – in terms of used car retailing expertise) that I or another experienced acquisitions professional, could acquire the car for £65,000:00. Now for the next owner, this is a year old, 625 BHP, 0-60 MPH in 3.3 seconds, class leading, supercar performance saloon for £65,000:00. Quite a bargain.
In truth it should be retailing for much more but regardless of this, with the pricing duress looming in specialist high performance used car markets, one person’s pain is another person’s gain.
So where does the current trading narrative and the lack of expertise within the sector leave those looking to sell or purchase a specialist high performance car. Well for those needing to dispose of cars it will be a challenge; why?
Well in market conditions like this (just those I predicted were coming, in my articles below in March and April) prices don’t correct by small margins, they correct by 10 – 20% from their previous high; and that is for the best examples; many will struggle to find any offers at all. For some owners reading this article, those not needing to sell their car, they can afford to gamble and look to return to the market when it has stabilised at it’s new level; probably in 18 - 24 months’ time.
For those needing to sell immediately though, the picture is very different; my advice is to get ahead of both the depreciation curve and market sentiment whilst (and if) you still can. This will not be palatable and/or enjoyable but if you need the money, take it now; the first offer will always be the best offer and with the market evolving as it is, procrastination will probably cost you £Thousands.
So with specialist high performance used car markets evolving at a pace, over supply leading to supply imbalances and a likely lack of purchasing liquidity within used car businesses, where to turn now for the owners of specialist high performances cars? Those looking for the right expertise and experience, that required to facilitate in the immediate liquidation of their car; a process requiring skill, expertise, the utmost discretion and excellence in execution?
Well with funds available for immediate purchase and unrivalled experience in liquidating specialist high performance cars, including the contacts base within the professional community, (both franchised dealers and the most knowledgeable specialists), you could contact me for a market consultation.
As much as I am not going to promise you for one moment that I work with every car that is offered, or with every owner that contacts me, I do choose to advise and help everyone who contacts me. In reality I can only go on to work actively with 10% of the owners who contact me; and their associated cars.
Offering immediate cash purchase, (should circumstances dictate), or the facility to act as your trusted conduit to the market, returning the best prices, I am the ultimate solution provider for those looking to dispose of their specialist high performance car.
For those looking to purchase though, the situation is far more beneficial, albeit just as challenging. Purchasing in market conditions such as those we are experiencing now, can be very lucrative and the right time to enter the market. Providing you have access to the expertise required to take advantage and ensure that (unlike the majority) you are not over paying in the current market.
Offering unrivalled access to the market, I work with selected customers securing the best examples of specialist high performance cars and at the right prices, via a network and level of expertise that has been built over 25 years.
Should you be interested in either disposing of, or purchasing a specialist high performance car, then please feel free to reach out to me directly on LinkedIn, via email at andrewb@andrewbanningsalessolutions.co.uk or on 07500 321539; so we can schedule a consultation call.
Andrew.
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