Motor dealers should seek alternative methods of buying stock as demand for used cars continues to rise, says David Nield, managing director of V12 Vehicle Finance.
With consecutive rises in April and May, used car prices are at record high. In a post-pandemic world, V12 believes dealers should be primed to explore different channels to keep up with the rate of change in the industry.
Driving the spike in demand is the appetite of consumers as lockdown restrictions are lifted in the UK. Nield notes that many people put off large purchases or financial burdens in 2020 due to continued uncertainty. As more people head back to work, dealers have seen a spike in interest and reported a record number of sales, both physically and online.
Coupled with this is the falling stock levels in the used car market, resulting in increased competition for stock. Some used cars in particular have gained more than £1,000 in value in a month, according to data from Cap HPI.
There are also concerns about the future supply of used cars thanks to a global semiconductor shortage, resulting in a smaller supply of new cars, which will ultimately have a knock-on effect for the used car market in years to come.
"The industry is facing supply-and-demand issues like never before," said Nield. "Auction partners are seeing record prices for vehicles but we've found that dealers haven't been as swift to react to these changes. The landscape seems unlikely to ease any time soon, which is why franchised and independent dealers should be reviewing their business plans and operating models in order to adapt.
"What we're seeing is that dealerships are quickly selling vehicles but not all have been increasing their advertised prices in line with the current inflation and increased demand. Another issue is that dealers are often outbid by large car supermarkets who have deeper pockets and shorter margins."
Dealers are encouraged to be more creative in their approach, exploring alternative routes of securing stock. One option is private sales, with dealers not competing with larger supermarkets or brands for vehicles.
V12 has seen this trend in its Trade and Forecourt statistics. As of 9 June, trade and forecourt loads makes up for 47% of the overall units funded which is up on May by 3.3%. This demonstrates that many dealers are turning to alternative channels such as part-exchange to purchase stock as auction houses are in short supply.