10 reasons for bounce back

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

The 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.

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.

MORE PEOPLE ‘NEED’ A CAR

Most people have been avoiding public transport and I can’t see that trend changing any time soon. The pandemic has scared people into their own personal spaces and more people have bought a car to get around – at all price points – instead of hopping on a train or bus. As the pandemic eases, social distancing and masks are likely to remain commonplace and so too will the trend for wanting personal transportation.

REVENGE BUYING IS A THING

It’s a phrase used by many now and characterises the fact that many people are taking ‘revenge’ on the pandemic by cheering themselves up with a new car purchase. Lockdowns have been depressing and for those working at home, getting out and about in the future will be even more important. While they might not be travelling to the office, leisure and recreational journeys will be more important than ever and I can see plenty of people wanting a new car to do that. Plus, a new vehicle makes people feel good – and right now we all need that.

TIMES ARE CHANGING

Unless you’ve been hiding under a rock, the government has announced the ban of new petrol and diesel car sales by 2030. That’s not far away. People will be thinking about changing to electric now, and if they’re not they will be very soon. As the choice in the market increases, the chance of them being tempted to change will only go up as well. Manufacturers are unveiling more exciting electric cars every week – and the appeal of swapping to some new tech will just grow stronger.

DEALERS WILL BE OPEN AGAIN

Car dealers managed to achieve 60 per cent of normal sales in January – which considering no one could see the car before they bought it is remarkable. Imagine what it will be like when car buyers can try before they buy again. Like it or not, many consumers are putting off purchasing because they want to test-drive the cars, or at the very least sit in one before buying. Many buyers will be spending this lockdown researching their next car and will be biding their time to buy when dealers open again. Which, hopefully, won’t be long before it happens.

What do you think? Am I right or wrong? If you’re a member of the Car Dealer website you can comment on this story and let me know what you think.

A new vehicle makes people feel good – and right now we all need that.

Daksh Gupta gives a few ideas for the list

ACQUISITION

Safeguarding your future: Gallagher strengthens its insurance and risk management offering for car dealers

Global insurance broker Gallagher recently announced that it had acquired the Bollington Wilson Group, providers of motor trade insurance under the Bollington Insurance and ChoiceQuote brands.

Gallagher’s existing automotive practice encompasses associations with industry bodies the RMI, IMI and SMMT, while Bollington has almost 50 years’ experience in providing bespoke insurance solutions and products for dealers.

The deal brings together two of the most respected names in motor trade insurance broking, but what does this mean for dealers across the UK?

We spoke to Daniel Little, an account executive of the automotive practice at Gallagher, and Pauline Brookes, head of corporate motor trade at Bollington, to find out how this deal benefits our sector.

Challenges lead to change

It is no secret that the motor industry has endured a tough time since the onset of the coronavirus pandemic, with dealers across the country forced to close their premises during successive national lockdowns, and new and used car sales affected in the process.

However, dealers have been proactive, increasing the pace of online click-and-collect sales and taking advantage of pent-up demand – particularly in the used car market – following the first lockdown in 2020, to recover some of the losses.

None of this was foreseeable before 2020, yet businesses have largely risen to the challenge and adapted to circumstances.

Through all of this, the need to be insured on the correct basis – and to manage risks effectively – has never been greater.

Specialist knowledge

Against this backdrop, Gallagher’s acquisition of Bollington aims to provide the best of both worlds: the backing of one of the leading global insurance brokers with motor trade expertise, allied to Bollington’s in-depth knowledge of all motor trade sectors.

Daniel said: ‘Our priority has always been to address the specific needs of our car dealers, providing innovative solutions to issues faced. Acquiring Bollington has opened up access to a nationwide network of specialist account managers, supercharging our presence in the sector and bringing us closer to dealers across the UK.’

We moved quickly to work with insurers to allow unaccompanied test drives wherever possible.

Pauline Brookes, head of corporate motor trade at Bollington

For more information please contact: T: 0800 612 2284 E: automotive_enquiries@ajg.com W: www.ajg.com/uk/automotive

Bollington’s detailed knowledge and experience has served dealers well during the pandemic.

‘It was obvious early on that test drives would be impossible to conduct safely with appropriate social distancing,’ explained Pauline. ‘So, we moved quickly to work with insurers to allow unaccompanied test drives wherever possible, providing advice to dealers on security in the process.’

That was just one concern, though. ‘During lockdowns, many dealers have been forced to leave premises unoccupied, with increased security concerns for buildings, stock of vehicles, and contents,’ she continued.

‘Again, we looked to extend cover for unoccupied premises wherever possible.’

Access to a wide range of motor trade insurers and products through Bollington, allied to Gallagher’s core service values and existing relationships with dealers, means that dealers across the country can receive the individual attention they need to protect their business.

‘We have all faced difficult times recently, but we are determined to help dealers of all sizes succeed in the future,’ said Daniel.

‘That’s why it’s important for us to offer tailored solutions. No two dealers are the same, and with a network of account managers, Gallagher can deliver the personal service they deserve.’

Examples of where Bollington has helped include Covid-19 secure risk assessments tailored to car dealers, Covid-19 testing, private medical insurance, and an adaptive approach to financing insurance for businesses suffering issues with reduced turnover over the past 12 months.

‘Gallagher’s acquisition of Bollington benefits dealers, as we combine our experience and offer a wide range of insurance and risk management support,’ said Pauline.

Daniel agreed, saying: ‘Gallagher is proud to support the industry, and our aim is to continue to offer the highest levels of service possible to car dealers across the country.’

With Gallagher holding over £32m of gross written insurance premiums under management in the UK motor trade sector*, the deal with Bollington brings an additional 10,000-plus motor trade clients on board. This allows for dealers of all sizes and types to benefit from the collective knowledge and experience of award-winning teams**, from sole traders to national businesses.

Our priority has always been to address the specific needs of our car dealers.

Daniel Little, account executive at Gallagher

About Gallagher

Founded by Arthur J. Gallagher in Chicago in 1927, Gallagher has grown to be one of the leading insurance brokerage, risk management, and human capital consultancy companies in the world. With a truly global reach, our organisation employs over 33,000 people and our international network provides services in more than 150 countries.

Our values are core to our culture. Passionate service, strategic innovation, and ethical behaviour form the basis of how we do business.

ajg.com/uk gallagher-uk @GallagherUK

Arthur J. Gallagher Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company number: SC108909. FP953-2020