BBC investigation into pre-registered cars

Tuesday 1st November 2016 | 0 Comments

 

An investigation into the pre-registering of cars by the BBC Radio 4 consumer programme ‘You and Yours’, suggests that up to a fifth of new cars in the UK are estimated to be “pre-registered” to dealers – potentially skewing sales figures and leaving drivers confused.

What is ‘pre-registering’? These are cars are sold to dealers, who register them under their own names, effectively becoming the first owners of these vehicles. The cars are kept off the road for 90 days, after which time they are put on sale to consumers at a discount – 20 per cent was a figure quoted as typical on the BBC website.

However, the Society of Motor Manufacturers and Traders (SMMT) disputes the figures and said the real total was significantly less, plus it added that the system allows dealers to manage stock efficiently. It should be emphasised that pre-registration is perfectly legal.

You and Yours says: “A key reason there are so many pre-registered cars is that they are often the only way dealers can achieve monthly sales targets set by manufacturers and, if dealers miss targets they risk losing monthly bonuses from the manufacturers.”

One car dealer, who asked to remain anonymous, told the BBC he had become dependent on pre-registering cars as he had such narrow profit margins.

“You need to do it to get the bonuses but the more pre-reg you have the harder it is to shift new cars,” he said. “It’s a vicious circle and can create cash flow problems.”

On the BBC website, Tamzen Isacsson of the SMMT defends the practice, saying: “Let’s be clear. This is driven by natural business demand and consumer choice. Self-registrations enable dealers to manage their stock.”

Possible drawbacks

While buying a pre-registered car can be cheaper for drivers, You and Yours points out that there can be pitfalls – not least that some buyer protection has evaporated.

Some 44 per cent of car buyers did not know what “pre-registered” meant, according to a survey for the BBC by Auto Trader of 1,000 of its readers.

About 55 per cent incorrectly thought the warranty on a pre-registered car would be either the same or longer than for a conventional new vehicle.

“It could be that a pre-registered car has been sat on a retailer’s forecourt for six months so that would mean six months of the manufacturers’ warranty would have expired,” Jon Quirk, editor-in-chief at Auto Trader was quoted as saying.

“Your car won’t technically be new because your name won’t be the first in the logbook.”

In response, Ms Isacsson said: “It enables consumers who don’t want to wait months for a new car to be able to access one immediately and with a very low mileage.”

There is also concern that the pre-registration market could skew new car sales figures, as they are not actually on the road. Motor industry analysts Cap HPI said its research suggested the numbers were growing, and could total as many as 100,000 cars in one month.

In a survey of 200 dealers, 80 predicted that pre-registered vehicles in September would account for 11 per cent to 20 per cent of the new car market. A further 52 expected them to account for 21 per cent or more of the market.

The wide range and vagueness of these figures is because trade bodies and government agencies do not collect an official record of the number of cars pre-registered by dealers.

James Baggott, editor of Car Dealer magazine, says on the BBC website: “We’re constantly talking about how buoyant the car market is, but pre-registered cars are inflating the real car market, they are often just sitting in a field somewhere. I would say that isn’t transparent enough because a number of people use the car industry as a bellwether for the economy.”

The SMMT’s Ms Isacsson defended the practice, saying: “Self-registration is a normal part of a functioning car market.”

Tricky questions

Chris Bosworth, director of strategy at Close Brothers Motor Finance, commented on the BBC investigation thus: “The investigation undertaken by the BBC into the new-car market has unearthed some interesting insight, and raises some tricky questions about the condition of the motor industry. With a fifth of new cars in the UK estimated to be “pre-registered”, this could have profound implications on an already dwindling market.

“A key reason for there being so many pre-registered cars is that they are often the only way dealers can achieve monthly sales targets set by manufacturers. And so, with 20 per cent of new vehicles potentially not being on the roads for a further 90 days, this, in theory, is skewing sales figures and providing an inaccurate representation of the health of the new-car market.

“Tellingly, over the last six months private sales have continued to fall in the new-car market, causing the growth trajectory of new car registrations to steadily drop. The buoyancy of the new-car market can only be attributed to a slight rebound in diesel vehicles as well as the growth in demand of alternatively-fuelled vehicles and fleet markets. However, again these figures, particularly fleet numbers, will be skewed from the pre-registered numbers that the BBC has uncovered. In addition, we have also seen over the last couple of months manufacturers reduce the number of subsidised finance offers available, which has led to a further fall in private sales through consumers now gravitating to well-priced ‘nearly-new’ stock – boosting used-car sales”

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Category: Market Info, UK News