A toxic cocktail!5 juli 2022, Paul
We are currently living on the brink, not of the abyss but of a major correction that will take place in the profit and loss sector of the car business. At least, that’s my gut feeling.
What is going on? By all data, we are now at an all-time high in the used car price index. Whether you ask Autotelex or Indicata or Michel van Roon, they all say that prices have never been higher. Not only in the Netherlands, but also in many European countries and in the US, prices have never been so elevated.
According to all data, we are now at an all-time high in the used car price index
In the picture below of Manheim, we see it very clearly! This cannot continue. Not enough new cars are being built, stalling the flow of consumers. It is logical that prices are rising dramatically. There is, of course, more to it.
Marktplaats and other portals
At Marktplaats, but also at some other portals, you see the inventory at car companies increasing again. This is due to two reasons. The first is that cars have been hard to come by for the past few months. Bidding on twenty cars and only getting one is suddenly different. Now you suddenly get them awarded, causing your stock position to rise, in combination with a very long lead time. (more on that later)
However, the demand for cars is slowly but surely declining. The reason comes from the East, the war with the accompanying higher energy prices, higher inflation, higher interest rates, and rapidly declining consumer confidence. Really, I noticed it Saturday in Il Fienile, my wife’s shop. It’s no longer like ‘do it.’
The reason comes from the East, the war with the accompanying higher energy prices, higher inflation, higher interest rates, and rapidly declining consumer confidence.
The price bubble continues to contribute to reduced demand. People are cautious. Another challenge is the long lead time to receive your vehicle. Fortunately, lead time is starting to decrease, according to figures from Michel van Roon and Indicata, but on average it is still far too long (see image above). Selling a car every 2 months, and therefore selling your inventory, on average, 6 times a year, is just too slow. You should advertise your cars, with an intent to sell today and not in two months. If the bubble bursts, you would like to have cars with purchase prices that are realistic. Deep in your heart, you know what the true value of a car is. A 2019 Suzuki Swift with an asking price close to the ‘new’ price is far from normal. Let’s find the realistic price, not today’s new normal.
Sell now! Use the opportunities that you still get daily through your own website and the portals. The goal for lead follow-up should be to make an appointment for every lead and not have the illusion that there are going to be many other leads to choose from. With today’s prices, those days of choice are in the past. So don’t wait two months, trade now so that you have the liquidity to buy for the right money again.