Hundreds of thousands of so-called ‘pack cars’ are exaggerating the health of the new car market and posing a headache for fleets.
New car registrations jumped by a better than expected 8.2% in September, in what carmakers have described as a sign of returning confidence.
But analysts suggest the market is being manipulated by carmakers to show an increase when it is actually flat-lining.
Used car pricing expert CAP claims carmakers are paying large bonuses for registering ‘packs’ of new cars to meet volume targets, suggesting that one in every three recently reported new car sales has been registered by dealers.
Fleets have already been warned this could send residual values tumbling and put contract hire rates under pressure, while outright purchase fleets risk thousands of pounds being wiped off their assets (Fleet News, August 2).
One FN50 leasing company believes the practice is already affecting fleets. “Self-registration has introduced volatility and a lot of deals are being done on an ad hoc basis by dealers and brokers,” said Peter Davenport, chief executive of Motiva.
Pack or pre-registered cars are generally sold as nearly-new or ex-demonstrators and offer savings to consumers of anywhere up to 40% on the list price of a new car.
Davenport added: “There’s very little stability in pricing, which makes things difficult from the fleet manager’s point of view. If the headline cost of a vehicle can go up or down by 30% from one day to the next, longer-term budgeting and investment decisions become harder.”
CAP says it knows of one dealer group offered £500,000 by a carmaker to put more discounted cars on the road in the past few months, while another manufacturer was subsidising discounts on new of up to 40% in return for self-registering cars. It also identified 80,000 tactical registrations by just two dealers in July.
The market has increased by 4.3% to 1,620,609 units in the first three-quarters of 2012 – up by 67,515 units – according to figures from the Society of Motor Manufacturers and Traders (SMMT).
However, Phil Robson, fleet director at Peugeot, cast doubt over the validity of the figures.
“It’s the way vehicles are being registered and it will cause a problem because it’s delivery mileage type product and a risk to residual values,” he said. “It is a risk for the industry and some manufacturers – and some you wouldn’t ordinarily expect to over-cook.”
“There will be some serious ramifications on residual values in the coming 12-24 months.”
Part of the problem is the relative strength of the UK market compared to severe weaknesses in Europe. Even Germany, the European powerhouse, suffered a near 11% fall in new car sales in September.
“The UK is the soft option for a sales push and manufacturers are plugging their market share,” says Robson. “But it will come back to haunt them in the used market.”
KPMG estimates that new car sales figures for the year are being overstated by approximately 5% thanks to pre-registrations and it suggests the overall market has actually been flat year-to-date.
The most recent figures available from the SMMT show that from January to August, manufacturers reported 2,400 pre-registered cars, for which they received £26.8 million.
But John Leech, UK head of automotive at KPMG, believes this ‘official’ figure only represents the tip of the iceberg in terms of pre-registrations.
Tip of the iceberg?
Pre-registration figures disclosed by manufacturers from January to August, 2012