September brings with it the second annual plate change and the second-largest month for new car registrations. With the country in its third quarter of a second dip into recession, customers are looking to finance more than ever to purchase a vehicle and dealers are conscious of the revenue available through finance.
So far this year, at the end of each quarter, the Society of Motor Manufacturers and Traders (SMMT) has made upward revisions to its estimate for total annual new registrations, now standing at 1,970,000 units.
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At the same time, the Finance & Leasing Association (FLA) has continued to post ever-climbing finance penetration figures at retail. Penetration began in January at 63.25%, already ahead of the 2011 record average of 62.9%, and has climbed every month to 68.6% in July, the highest since FLA records began.
The Motor Finance survey includes answers from 13 dealer groups, from Perth in Scotland, to the south coast of England; from the Tawe to the Tees. The dealerships represent more than 200 locations between them, ranging from single-site franchise dealers to multi-marque groups and including some of the biggest-selling brands of the year so far – Ford, Vauxhall, VW, Audi, BMW – from luxury motors to city run-arounds.
Are you doing anything special for September’s plate change?
Dan Foskett, sales manager, Greenhous Group: We’ve got a VIP event. We’ve sent out 10,000 invitations. We did one of these similar events in March and sold 50 vehicles off the back of it.
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By GlobalDataSandy Risk, business development manager, Eastern Western Motor Group: We have a number of hot finance deals on offer for Q3 and, in particular, September. These range from low-rate PCP, 0% HP, deposit allowance and discounted servicing arrangements (in some cases, free).
Peter Stewart, F&I director, Vertu Motors: Showroom events, off-site events, shopping events, general community events. The promotion is generally PCP-driven, low monthly outlays deferring some of the vehicle’s worth and 0% finance.
Simon Rees, F&I director, SG Petch: We’re running a lot of PCP deals. We also have a special deal with Black Horse, with a 2.5% flat rate for the quarter for cars under a year old.
Simon Taylor, general manager, Mangoletsi: We sent out a 16-page ‘Mangoletsi Matters’, covering all our September offers: 0% over five years, five years’ complimentary servicing, five-year warranty, low-rate PCP, minimum £1,000 part exchange, £1,000 deposit allowance.
Ivan Ferris, branch sales executive, Currie Motors: Not especially. Customers know the offers, so much is rate-driven. There’s a lot of 0% offers, like the three-year PCPs; we’ve got a lot of them.
Really, on the 1 September, because we’ve got so many cars going out and we’ve got the rugby [at Twickenham] as well, we get what we can signed-up beforehand. We’ve only got one business manager at the centre, and the majority of customers will be in the morning. It’s going to be mad in the morning and then there’ll be the rugby.
Rob Stanley, finance manager, FRF Motors: Vauxhall at the moment has flexible finance advertised on TV, so they’re promoting that.
George Watson, sales manager, John Harrison Motor Group: As there are only two people on the sales team, we’re quite a small company; we’re not doing any massive public events.
Tim Roelich, sales manager, Border Cars: We always have offers on with our manufacturers so we can afford to keep things pretty much the same. One of the deals we have all year round is, for instance, Mazda cars are VAT-free and one can borrow the rest on 0%. Hire purchase is our main source of focus for sales. Other than marketing, spreading the message, exposure to encourage people in to buy the new plate reg, we’re doing what we always do all year round and if the sales don’t increase or do well then we’ll take action on that toward the end of September.
Chris Hughes, business manager, JD Cleverly: No, our deals predominantly stay the same. Ford is a manufacturer which runs quarter-to-quarter so there are regular showroom changes, nothing particularly special.
What finance products are performing well?
Ivan Ferris: We’re probably bigger on PCP now. Most garages are. A lot of the new market is PCP. Used is more of a blend, it’s probably predominantly still HP. It depends on the car. It also depends on the customer and the age of customer. Younger people are more susceptible to PCP.
The majority of what we do in finance is PCP which, for the future, is a good thing because PCP is better for people. At the end you are protected. It’s a win-win.
The majority of people finance their cars. Whether or not they do it through the dealer, or through their banks, they’ll be financing it one way or another. Finance penetration in dealers will average around the 40% mark, just under half. At times it could be a bit more but, if you average it out, it’s probably about the 40% mark.
George Watson: Our most popular offer will most likely be 4.9% over two years. Perhaps with an £8,000 one-off buy. For us, selling new cars, it’ll probably be mostly sold on standard finance – 4.9% over two years or 7.4% over three years, most likely.
Dan Foskett: Nearly all straightforward hire purchase, the majority for five years.
Sandy Risk: We expect a high percentage of new cars to be funded on manufacturers’ PCP, in some cases as much as 50%.
Rob Stanley: There’s very little PCP in the Vauxhall range, 95% HP, with the flexible finance 0% over five years. Other manufacturers sit on the back of PCP but Vauxhall don’t.
Peter Stewart: Depends on the manufacturer. Not strong PCP, strong HP, i.e. Vauxhall’s five years at 0%. Against that: Ford’s strong PCP with subvented finance. PCP is strong where residual values are also strong and customers are getting good monthly outlay.
Tim Roelich: HP, five-year HP, no specific offer. They utilise the needs of the customer and we tailor the finance package according to what they’re looking for.
What communication have you had with your finance provider to get ready for Septmber?
Dan Foskett: We have GMAC and Santander come down regularly for monthly meetings with business managers.
Chris Hughes: Regular contact, they come in once or twice a week. We’re not doing a massive promotion for the 62-plate, as it’s much more consistent. It’s what we always do. We have our normal orders, but they can’t be delivered until tomorrow, but tomorrow is primarily a delivery day.
Peter Stewart: There has been feedback as 2012 has gone on as this isn’t something you do at the last minute. Both we and our finance partners have been watching the market clearly with the reduced number of new cars sold over the past two years.
George Watson: Glen [Waldram, sales manager] has been on the phone a lot and I expect that they’ll come and check up on us here.
Rob Stanley: We don’t really need to; we agreed it was more done by the quarter.
Ross Brandrick, Richard Sanders Group: Generally, what we find is they plan for a peak in business. Well in advance we get a notification of opening hours and cut-off date for applications.
Simon Taylor: Weekly visit and regular communication with Close Motor Finance, Black Horse and Fiat Group Automobiles.
Tim Roelich: We get a visit from our finance providers every month so it’s not that different. We have a number of different finance providers so it’s about accommodating all of those people.
Have you encountered customer scepticism over finance products?
Rob Stanley: Scepticism over PCP, that the monthly payment doesn’t include a final massive payment. They want to check we’re not quoting them HP with a balloon at the end.
Ross Brandrick: A little bit, some think PCP is too good to be true. We’re quite lucky that we do well out of repeat customers.
George Watson: As we predominantly have cash buyers we haven’t had any customers moaning, they’re quite careful.
Ivan Ferris: Older people, sometimes. It depends how it’s not so much sold to the customer, but whether people understand it. But PCP’s a really good way to change your car and protects the customer as well. The British way is we don’t like change, anyway.
Simon Rees: Not really. A lot of the deals have deposit contributions of £1,000, especially low-rate PCPs.
Dan Foskett: No not really, we generally explain. The 0% finance offer is so good right now, interest-free HP, rather than interest-bearing. Our PCP penetration dropped through the floor before 0%.
Sandy Risk: We are SAF-approved and our customers have great confidence and trust in the current finance packages available. The new car offers are extremely attractive and very popular.
Peter Stewart: The competition from the direct lenders isn’t strong. With that in decline, the manufacturers and specialist motor lenders are really in the prime point. As far as customer objections are concerned, there aren’t really any. Of course we have seen the price of new cars increase, mainly due to exchange rates, but if you look at the cars as a monthly outlay, it hasn’t increased. The price of cars has gone up, the monthly outlay hasn’t.
Tim Roelich: Only thing we’re having an issue with is largely subprime customers. No real objections though, as we’ll always do as much as we can.
Are better-than-expected car registrations this year down to finance making more sales happen?
Simon Rees: Yes, definitely. There are very attractive offers. It’s also reduced used car sales to a degree.
Peter Stewart: The low cost of finance is making sales, with those low costs are being passed on by manufacturer and other finance providers to consumers.
Chris Hughes: Yes. It does have an effect on volume. The cheaper, the more appealing it is.
Ross Brandrick: Yes, cars now are attractively priced to monthly budget. In this climate, people are thinking what they pay every month, looking for places with service included. Renault does one with roadside assistance. People have tighter budgets and look for fixed-price motoring, servicing and road tax.
Tim Roelich: Don’t know, down to the fact that there’s never been so good a deal on a car. Not just finance, no VAT has never been done before.
George Watson: For us? No. There were great marketing campaigns by Ford which enabled us to exploit the customer’s desire. Good pressure from driving factors – new year, new start, etc.
Do you expect to see more plate change activity than last year?
Simon Taylor: Yes.
Dan Foskett: We’re going to be looking at doing more this year. We’ve got a higher manufacturer target, increased by 10%, and we’re hoping to meet it. We’re quite a long way up on last year. 0% has something to do with it; it’s as good as any well-communicated product.
Rob Stanley: Probably better this year. In the industry we can analyse until the cows come home. We’re more concerned with an improved profit line. Figures might be up, but we might not make more money. Saying that, there are a fair number of proposals more than last year, and more than March.
Ivan Ferris: Probably quite stable, quite similar. I don’t think it’s any busier than last year.
Sandy Risk: Roughly the same as last year. The market is still tough and trading conditions remain difficult.
Ross Brandrick: It’s going to be similar, generally on a par.
George Watson: Probably not, it’s a bit of a struggle. For some reason, in recent months, it has been hard. The first half went well, but that’s hasn’t continued throughout the year so we expect it to be tough.
Simon Rees: No, down about 10%. The market’s very depressed, the general economy is rubbish and you can quote me on that. It’s not like it used to be.
Tim Roelich: This year is proving to be such a strange year in terms of car sales, it’s hard to predict. For instance, we just had our most successful August to date, so it could go anywhere. The last months have been strange.
