Shortage of retail ready stock forces up prep costs

Used car dealers should be prepared to invest more in valeting staff or be ready to pay sub-contractors more money, as a shortage of quality stock forces traders to get more competitive to put retail ready vehicles in their showrooms.

A new report from the Vehicle Remarketing Association – which holds its AGM in Birmingham next month – says that this situation will only get worse throughout the rest of 2019 as fleets hold onto their current vehicles for longer and franchised dealers get more heavily engaged in used sales to compensate for a drop in new.

Sam Watkins, VRA chair, said the shortage of quality stock is already a significant issue and will only get worse.

She said:

“While there is a quite a lot of stock in the market, comparatively little of it is of the highest ‘retail ready’ quality and can be put on sale with minimum preparation. This is something that has become increasingly apparent over recent months. It is also likely to become more of a factor because it is being exacerbated by the fact that fleets – probably still the main source of good stock – are hanging on to cars for longer thanks to ongoing confusion over vehicle taxation and generally lower economic confidence.

“The outcome is that many used car retailers are increasingly having to buy vehicle stock that is of a lower quality than they would like and then spend time and money bringing it up to standard. This puts resources under pressure and creates quite a lot of additional work.”

Faster stock churn compensates for lower margins

The situation is putting a further squeeze on profits as dealers opt for a faster stock churn to compensate for lower margins. Around a third of used car dealers report themselves to be in this situation compared to a year ago but this is putting yet more emphasis on the need for rapid prep work.

Cars fitted with labour-intensive features such as diamond cut alloys or the ever-increasing number of driver assistance technologies may take more man hours and incur heavier preparation costs.

Sam added:

“Generally, our members have been reporting higher stock turnover as a reaction to decreasing unit profitability. This makes the issue of having to prepare vehicles for sale more thoroughly much more of a pressing issue.”

“Also, exacerbating the problem is the fact that an increasing number of cars are being fitted with items that are not easy to repair quickly, such as diamond-cut alloy wheels or a variety of ADAS systems.”

“It does very much underline the key role that vehicle preparation services play when it comes to supporting used car retailer strategies – and this situation is likely to become even more acute over coming months.”

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