According to Alex Wright, Managing Director of Shoreham Vehicle Auctions (SVA), cash flow is fast becoming king as large car dealerships and used car supermarkets pay well above market valuations to secure car inventory. second hand.
Wright said that while many in the industry have argued that soaring values ââand high margins lead to windfall profits, small retailers are out of the race to fill their yards amid a severe shortage of inventory.
“Used car buyers for large franchise groups and car supermarkets are allowed to pay up to Â£ 1,000 above CAP Clean at auction for used cars to ensure safe stocks “, did he declare.
“Many dealerships don’t have the cash or the wholesale funding budget to compete with this purchasing power and that’s why many forecourts now seem empty and businesses are struggling to make money.”
Auto Trader reported last week that more than one in 10 near-new used cars are now more expensive than their new equivalents, as limited supply and growing demand led to an 18.6% increase in values ââin year-over-year.
And yesterday, Indicata said its data showed used car prices up 16.6% in the first eight months of 2021, with an imbalance between supply and demand dictating that customers would “be demanding. the stock they can get their hands on â.
Wright of Shoreham said many car retailers are struggling to keep their used car inventory levels above 50% of their normal levels as they struggle to buy stock at auction due to the increased competition.
He said, âEveryone thinks that just because the used car market is dynamic, all used car dealers are making a healthy profit every month.
âThis is not the case with many dealers I speak with who are struggling to buy replacement inventory and sell enough cars to cover their overhead costs in today’s market.
“The dealers who make money are the brave ones who pay the best prices, guarantee good quality stocks, and then sell them for prices higher than the valuation guides used.”
Shoreham said many used cars 12 months and under sell for about the same price as new ones in the retail market at irts auctions.
The trend was most prevalent in the premium SUV industry as impatient consumers turn to used cars due to the supply of new cars compromised by global semiconductor shortages, he said. he declares.
Wright reminds dealers to make sure stock cars are priced to compete with rival dealers for a healthy profit per unit.
He said: âIt is not in the mindset of many dealers to increase the prices of used cars because the price of unsold inventory is usually reduced after 60 or 90 days.
âIn this volatile market, prices should be reviewed daily and increased as necessary to ensure cars are sold at current market value. “