Motorists 'hit hard' by late deals for market share
DRIVES by distributors to hold share in a shrinking market are penalising thousands of motorists, a leading industry figure claims.
Ford Ireland chief Eddie Murphy has come out strongly to warn that current levels of 'distress' car pre-registrations are:
• Hurting buyers by hitting re-sale values.
• Seriously distorting the market.
• Hitting smaller dealers.
A 'pre-reg' is a car that has been registered – not sold in the strict sense – usually towards the end of a month. It appears in statistics as a new-car registration for that month and boosts/bolsters perception of market share. It works for dealers who get financial incentives from their distributors or importers to lift market share if normal sales are down.
As of close of business Monday, there were 6,238 new cars registered. Usually the level of pre-registrations accelerates in the final days of a month.
The vehicles are registered and, thanks to substantial backing from some distributors, they can be sold the following month or so, for a good deal less than the going new-car price.
That lower price – often running to thousands of euro – can be good news for one set of buyers.
However, it can hit the residual value of similar models bought earlier in conventional sales, according to Mr Murphy. That means those who paid the 'full' price suffer a devaluation of their purchases.
Speaking at the formal launch of the heavily revised Fiesta and Kuga, Mr Murphy said Ford will not incentivise dealers to pre-reg, even if it means losing some market share. "Across Europe, Ford has taken a view that it does not want to be in this short-cycle business. We may incur a market share decrease for this strategy but, ultimately, we believe it is right for our brand. From what I see, Toyota is the only one of our key competitors who have a similar view," he said.
"I've no idea about the likely size of this year's market. But I feel it will really be determined by those distributors who consistently engage in distress registration actions like pre-regs and early rental registrations."
He asked: "You may say what is wrong with that?"
His response: It affects customers who bought earlier in the month and paid a higher price, distorts the market and hits smaller dealers.
While lowered projections of 70,000 new-car sales are now being widely touted, he reckons the real sales figure could be closer to 60,000.
He also spoke of a surge in rental registrations. The total for February was 2,279 – up from 1,200 in the same month last year. "Suffice to say that trade sources in the rental business advise that they had a lot of parked-up vehicles in the first two weeks of March."
He appealed to Finance Minister Michael Noonan to 'revisit' the domestic economy. "This is another high-street industry where there is no growth."
On a brighter note, he believes creative dealers will sell cars, because finance – not so much from the banks but from the carmakers – is not a problem.
PCPs are increasingly playing a role. The customer agrees a price, then a deposit and then a payment term and monthly rate.
At the end of the term, they can renew a deal for a new model, return the car with nothing further to pay or buy the car outright.