Loophole stops industry from going full speed

Elizabeth Fournier
FINALLY, some good news. Not only did car sales improve by more than expected in September, but the gains came mostly through consumer spending rather than corporate sales.

But wait – a new car? That’s a pretty luxurious purchase in these straitened times, surely the squeezed middle can’t be cutting back on everything else and then splashing out at the dealership.

Well actually they’re not, according to analysts at KPMG who estimate that the new sales figures have been overstated by five per cent leaving them, you guessed it, flat in the year to date.

Here comes the science bit. Carmakers, keen to shift motors, offer dealers a bonus to register their vehicles before a sale has actually been agreed. This effectively makes the dealer the car’s first official owner – meaning it can then be sold onto consumers at a discounted nearly new rate.

Manufacturers benefit from the steady flow of orders, while dealerships can pocket the bonus – and bump up their sales figures when buyers are staying away.

There’s nothing below board about the process, but KPMG says a legal loophole that allows dealers to report a much lower level of pre-registrations is distorting figures enough to wipe out any positive growth.

But whether consumers are buying new-new or nearly new, there’s certainly no sign of a decline in the private car market, which has remained surprisingly robust while other industries have suffered.

Carmakers will take some relief from the fact that deep discounting, attractive financing offers and fuel-efficient new models can always tempt consumers.

The drip-by-drip effect of consumer spending may be buoying figures for now (though a pending review of pre-registrations by the Retail Motor Industry Federation could change that), but more worrying going forward is the slowdown in fleet and business orders.

While fleet sales grew moderately at 3.3 per cent on last year, business orders were down by almost one per cent. They may represent a small part of the overall industry, but the figures points to a trend of cash-strapped firms putting off big replacement orders while the economy is still floundering.

In the meantime, manufacturers will have to hope those Ford Fiestas (still the UK’s favourite car) keep flying off the forecourts – discounted or not.

Elizabeth Fournier is News Editor of City A.M. @ej_fournier