OPINION
Here are 10 reasons why I think there’ll be a rapid recovery in car sales when lockdown ends Low levels of debt, record amounts of savings plus a healthy dose of pent-up demand could all help towards a big comeback, predicts James Baggott
T
he new car market may have suffered a near-40 per cent drop in January but with showrooms closed and test drives frowned upon, is that any surprise? The fact dealers managed to achieve that level is impressive in itself and demonstrates a resilient, imaginative and talented industry that has adapted quickly to keep going. But with restrictions looking more and more likely to impact on March’s new registration plate change, what could happen to car sales this year? I’ve been chatting to plenty of car dealers, manufacturers and industry experts over the past few weeks and while they all admit times are tough right now, there’s an increasingly positive underlying sentiment among them. There’s hope things will get better rapidly once restrictions are lifted and I’m inclined to agree with them. While these are merely my personal predictions, I’ve thought long and hard about the reasons why I believe car dealers have reasons to be cheerful. I could be accused of looking on the bright side, but I’ll make no excuses for a little dose of optimism. 96 | CarDealerMag.co.uk
2020 WASN’T ALL THAT BAD
Despite car dealerships being closed for three months of the year, tiered restrictions and different rules for the regions, many car dealers are reporting impressive numbers. A heady mix of furlough, business rates holidays, the opportunity to cut costs, rising used car prices, a boom in demand and the death of pre-reg saw many dealers chalk up record years. One group boss told me his 2020 numbers would be ‘historic’. That’s hardly a disaster is it? Expect to see more of that as numbers for last year are released.
LESSONS HAVE BEEN LEARNT
Car dealers have adapted quickly. Online sales are rapidly becoming the norm and customers like being able to do much of the car sales process at home. While at the moment they’re forced to do it, when restrictions are lifted and customers are able to do both digital and physical visits, the opportunity for dealers will be vast. Digital sales, facilitated by fewer staff, also keep costs lower.
SAVINGS ARE HIGH
While many people have sadly lost their jobs, the numbers haven’t been quite so great as many experts feared. Those who have remained in work have stashed away more money than ever before, with the Bank of England revealing that consumers have £125bn in their savings accounts. The Bank predicts £6.5bn of that will be spent as we emerge from lockdown – and I can see many using the funds to splash out on a new car.
CONSUMER DEBT IS LOW
Discretionary spending is at an all-time low as households are only able to buy essential items since the majority of shops are closed. They can’t go out to eat or drink either, meaning they’re spending the cash they’d otherwise be frittering away by paying off debt instead. Consumer levels of debt have plummeted while record-low interest rates mean there are great deals to be had. An attractive car finance offer could tempt buyers as we emerge from restrictions.
HOUSE PRICES HAVE REMAINED HIGH
One of the main reasons consumer confidence hasn’t dropped too far is because house prices have remained buoyant. The stamp duty holiday has helped fuel the market, and while prices dipped an insignificant 0.3 per cent in January, they have enjoyed seven consecutive months of growth. When people’s homes grow in value, they feel wealthier and are more likely to spend out on other things – cars included.
NO ONE IS GOING ON HOLIDAY
There’s next to no chance that the family holiday to Spain or Greece is going to happen this year and for many families that represents a huge saving. If they’re opting for a staycation instead then they might choose to upgrade the family wheels for something more suitable or reliable. If they’re saving thousands by not going at all, they might choose to use that cash for buying a new car instead.
