Motorists will pay for 'vicious circle' of new car registrations growth, says CAP

MOTORISTS will ultimately pay for the car makers’ new car sales appetite, according to the independent car information experts CAP Automotive.

The relentless pursuit of volume and market share which sees many more cars registered than customers need will inevitably lead to faster depreciation for car owners.

Now the pressure is back on dealers to register more cars in October than their customers want as 2014 heads toward a year-end record total that could even exceed the officially forecast 2.45 million.

The intensity of the pursuit of new car volume is revealed in confidential daily registration figures seen by CAP.  These showed the rate of registrations ramping up in the second half of September - confirming private feedback from dealers to CAP detailing mounting pressure to meet big manufacturer targets.

While 41% of September’s registrations took place in the first ten days of the month, the final ten days contributed 45% of the total – many of which were registered to dealers themselves.

The list of incentives offered by manufacturers to dealers in October in many cases exceeds the September push, according to CAP’s experts who monitor behind-the-scenes market activity every day.

Zero rate finance, deposit contributions up to 20% or more of the vehicle’s value, hefty discounts, nil deposit deals and monthly interest rate reductions are all in play in an attempt to push registrations toward the highest total for a decade.

Some dealers are even under pressure to persuade Personal Contract Purchase customers to swap into a new car as early as halfway through their three-year contract term, to help meet new car registration targets.

But despite the apparent economic good news of a burgeoning new car market recovery there is no such thing as a free lunch, say CAP experts. More new cars forced to be sold as used cars inevitably means greater pressure on used car values across the board – which means existing car owners will ultimately pay.

“Our prediction that this September would be the biggest in a decade proved correct and it is now clear that some manufacturers are on a mission to push new registrations hard through the final quarter of 2014,” said CAP’s retail & consumer specialist Philip Nothard.

“A number of dealers have even told me they are embarrassed by having to call people who only recently took a PCP deal and try to persuade them to take yet another one, long before they expected to change their car.

“I have been in the industry for 26 years and have never seen such determination to throw money at new cars in the pursuit of volume.

“While it’s good news for anyone in the market for a new car, there really is no such thing as a free lunch and the ultimate impact will be on the secondhand values of cars.

“With depreciation forming the greatest part of anyone’s cost of motoring, the bill for oversupplying the market in this way will eventually be picked up by motorists.

“The industry itself is already aware of the future impact on used car values because they have the benefit of professional forecasting tools such as CAP Automotive’s Gold Book system, which has already built this increased depreciation trend into its view of the next three years.

“The pursuit of volume is unlikely to ease now because the manufacturers are caught in a vicious circle. If one car maker stops incentivising their new car sales they will simply lose market share to competitors, so the trend becomes self-fuelling.

“But ordinary car buyers need to be aware that today’s irresistible deal almost always translates into tomorrow’s disappointing trade-in value.”