Will "preregging" kill the Irish car industry?

carsfan2

Mercedes Ireland boss seems to think so.

http://www.independent.ie/business/irish/mercedes-ireland-executive-unleashes-unprecedented-attack-on-new-car-market-preregging-practice-36169897.html.

I would have thought that this has been going on for years and that imports from the UK are doing more damage to the car sales business here.
Any opinions?

colm_mcm

That's hilarious considering they slashed 10% off their RRP for months.

Lantus

A Mercedes comment was discussed on Matt Dempsey tonight as well. It's at 1:40 ish if you have the app.

Basically a number of dealers are very close to going over a cliff due to the huge imports from UK and the significant drop in residual values. This will of course have a huge impact on PCP which is really dependant on those residuals.

I'd say he is probably right and 181 reg will be the commencement of the turn around in new car sales.

Dealers will want equity cash injections to get people into new cars. People will see the declining market and I would imagine decline to go new and buy out their existing car on finance, if on PCP.

The gap between new and even nearly new will widen to where new becomes financially difficult (impossible) to justify.

I have a mate who just enquired on his soon to be 2 year old car on pcp for trade in and even with a 12 to 14pc deposit similar to mine they needed upwards of 1700 to keep payments the same. That's on a cheapish car. Dont know the exact figures but I'd say the equity retained is around 8 to 9pc. That's not good news so I may enquire myself to see where I stand!

I've been leaning towards buying so it's not an issue for me and ultimately everyone is in the same situation re lower values.

Toyotafanboi

Ah pre regging is hardly a new thing, he's talking like this is a hot new scandal.

It's not as if the pre regs don't get sold and the hire drives don't earn money. Undoubtedly it devalues the value of <6 month old cars but again, it's hardly new.

Zurbaran

What he I think he is suggesting is that if the companies stand firm Joe soap will pay the full price. I'm rooting for him..

Skylinehead

Lantus wrote: »

Basically a number of dealers are very close to going over a cliff due to the huge imports from UK and the significant drop in residual values. This will of course have a huge impact on PCP which is really dependant on those residuals.

UK imports aside, is the PCP thing not inevitable? Dealers push loads of people onto PCP deals, they change their car 3 years later, the "3 year old car" market gets flooded, so values of those cars go down.

Lantus

Skylinehead wrote:

UK imports aside, is the PCP thing not inevitable? Dealers push loads of people onto PCP deals, they change their car 3 years later, the "3 year old car" market gets flooded, so values of those cars go down.

Possibly. Too much too soon also a factor so a correction necessary.

RedorDead

carsfan2 wrote: »

Mercedes Ireland boss seems to think so.

http://www.independent.ie/business/irish/mercedes-ireland-executive-unleashes-unprecedented-attack-on-new-car-market-preregging-practice-36169897.html.

I would have thought that this has been going on for years and that imports from the UK are doing more damage to the car sales business here.
Any opinions?

So rich from MB after doing the most in the industry to slash residual values by hocking 10% off their list prices in November last year. Pre Regging is generally the reserve of companies owned directly by manufacturers to hit more stringent factory targets and has been rife both here and in the Uk for years. Its always the private owned importers with no factory financial backing that whinge about it.

If they can do retail, do fleet, do a few rental deals and do a few pre reg to balance books and still make a profit wheres the harm? Punters are getting a good deal at the end of it and manufacturers and dealers still make money.

acronym Chilli

RedorDead wrote: »

So rich from MB after doing the most in the industry to slash residual values by hocking 10% off their list prices in November last year. Pre Regging is generally the reserve of companies owned directly by manufacturers to hit more stringent factory targets and has been rife both here and in the Uk for years. Its always the private owned importers with no factory financial backing that whinge about it.

If they can do retail, do fleet, do a few rental deals and do a few pre reg to balance books and still make a profit wheres the harm? Punters are getting a good deal at the end of it and manufacturers and dealers still make money.

I suspect that you're right.

The only thing that might cause concern is if you have a mechanism used to make small adjustments that then is being used to cover up major dislocations or problems.
e.g. in personal finances, if you use credit on credit card to bridge the last couple of days of the month before pay-day, that's probably not a catastrophe even if it's a bad habit to get in that situation.
However, if you lose your job and try to maintain lifestyle by compensating with credit, then that will be a road to collapse.

So, if there was a big downshift in sales in ROI due to e.g. UK imports and maybe unwinding of PCP, and if pre-regging grew to cover that up and compensate, then that would probably cause serious problems sooner or later.

Lantus

It's not one single thing but the over selling of PCP which has created a lot more nearly new cars plus the UK rates which have encouraged overseas car purchase is pushing prices down significantly of used cars in roi.

Other smaller issues like ore regging compound this and amplify it plus any other relatively minor at any other time economic factors.

I think we will see a significant drop in new car sales and especially PCP for several years. Those with PCP will hang on to what they have and until a tarrif is brought in we will be at the mercy of an external economy.

Manufacturers of all but the most common and best value makes will be hit hardest.

RedorDead

acronym Chilli wrote: »

I suspect that you're right.

The only thing that might cause concern is if you have a mechanism used to make small adjustments that then is being used to cover up major dislocations or problems.
e.g. in personal finances, if you use credit on credit card to bridge the last couple of days of the month before pay-day, that's probably not a catastrophe even if it's a bad habit to get in that situation.
However, if you lose your job and try to maintain lifestyle by compensating with credit, then that will be a road to collapse.

So, if there was a big downshift in sales in ROI due to e.g. UK imports and maybe unwinding of PCP, and if pre-regging grew to cover that up and compensate, then that would probably cause serious problems sooner or later.

Over ambitious GFVs is where the fun and games will be in the next couple of years.

As an example BMW launched the new G30 5er at 6.9% APR with a GFV of 50% to keep the monthly payments down. Those cars are going to be untouchable in 3 years time should exchange rate and imports continue as they are. The gaps in equity the customers will actually have vs perceived equity will be enormous!

carsfan2

RedorDead wrote: »

Over ambitious GFVs is where the fun and games will be in the next couple of years.

As an example BMW launched the new G30 5er at 6.9% APR with a GFV of 50% to keep the monthly payments down. Those cars are going to be untouchable in 3 years time should exchange rate and imports continue as they are. The gaps in equity the customers will actually have vs perceived equity will be enormous!

When that happens I'm guessing they will introduce "dealer contributions" to bridge some of that equity gap and keep customers in the pcp loop.

bazz26

Imports will dry up come March 2019 when the Brits leave the Customs Union and people have to pay VAT on top of VRT.

Lantus

carsfan2 wrote:

When that happens I'm guessing they will introduce "dealer contributions" to bridge some of that equity gap and keep customers in the pcp loop.

That would be great and I think dealers may well do this at least for a few years before UK imports are tackled to ensure 2nd hand sales stabilise.

The BMW gmfv is really hard to deal with and as I said those brands that did this will be hit, but as it's generally wealthy people buying such cars I'm not too bothered. If BMW want to subsidise their customers then fine. No issues.

It's the average family man in a ford, Skoda, Toyota I'd be concerned about.

Hopefully these brands can bridge the gap to protect themselves and help cushion their customers.

grogi

bazz26 wrote: »

Imports will dry up come March 2019 when the Brits leave the Customs Union and people have to pay VAT on top of VRT.

Mrs May just recently did another U-Turn on that matter.

Mark my words - they won't leave at all in the end.

grogi

Lantus wrote: »

Hopefully these brands can bridge the gap to protect themselves and help cushion their customers.

Help customers? One took a finance to get a car, just keep paying until you owe it. Nobody should feel entitled to a new car every 36 months.

If everybody had a new car every three years, residual value of a 3yo would be 0.

Skylinehead

Skylinehead wrote: »

UK imports aside, is the PCP thing not inevitable? Dealers push loads of people onto PCP deals, they change their car 3 years later, the "3 year old car" market gets flooded, so values of those cars go down.

Perhaps.
There's going to be an awful lot of Highline diesel VWs in 18/24 months time that might be worth just their GFMV if the anti diesel speel gathers momentum and folks who don't need diesel move to petrol / hybrid or EV.

godwin

What's killing the car market is the over inflated prices for cars in Ireland. The fact that it's easier than ever to buy/import a car from the UK only exposes the ridiculous price differential between the 2 countries. The best way to combat this would be to reduce prices in Ireland, but that won't happen because they will try combat it by crying.

R.O.R

godwin wrote: »

What's killing the car market is the over inflated prices for cars in Ireland. The fact that it's easier than ever to buy/import a car from the UK only exposes the ridiculous price differential between the 2 countries. The best way to combat this would be to reduce prices in Ireland, but that won't happen because they will try combat it by crying.

The big difference in price is solely due to the devaluation of sterling. Should Spain, Germany, France etc. lower their prices too?

bazz26

If anything it's the taxes such as VRT that bumps up the prices here. The Irish pre tax prices are some of the lowest in the EU afaik. Weak sterling compounds it.

dil999

Augeo wrote: »

Perhaps.
There's going to be an awful lot of Highline diesel VWs in 18/24 months time that might be worth just their GFMV if the anti diesel speel gathers momentum and folks who don't need diesel move to petrol / hybrid or EV.

As a recent purchaser via PCP of a VW highline model, I think you are correct. It will be interesting to see the GMFV of newer PCP deals, and if they fall below the 40% value that is the norm currently.

I have said it before re PCP. make your calculations based on zero additional residual value over the GMFV. It's the only thing you are guaranteed. Anything else is a bonus.

Lantus

I was pricing a Nissan leaf the other day and their gmfv is around 26 percent!

On a 25k car it's 5500eu after 3 years....

On the plus side you will probably have equity but you have basically bought the car!

death1234567

bazz26 wrote: »

Imports will dry up come March 2019 when the Brits leave the Customs Union and people have to pay VAT on top of VRT.

They won't be leaving the customs union or they'll leave it and then straight away sign a new deal that's the exact same as the customs union.

Casati

dil999 wrote: »

As a recent purchaser via PCP of a VW highline model, I think you are correct. It will be interesting to see the GMFV of newer PCP deals, and if they fall below the 40% value that is the norm currently.

I have said it before re PCP. make your calculations based on zero additional residual value over the GMFV. It's the only thing you are guaranteed. Anything else is a bonus.

I must be mad but I can't see why the finance type used to buy a car will impact it's value in three years? It's not like pcp was only available on a certain day in 2015 and the market is going to flooded on that day in 2018 as everybody trades in!!

Resale value is determined by supply and demand, car sales don't seem to be at an artificially high level are are still way below boom times. For sure UK imports are driving down some
values but most imports are five or six years old and used values for Irish cars two and three years old are generally high

I agree with mr Mercedes to a certain extend, rrp of cars has crept up but the discounts, pre reg, and cheap finance have brought down the actual purchase costs of new cars. Low sterling simply has the effect of keeping manufacturers somewhat honest. A post Brexit world with import taxes on used imports would result in massively higher new and used cars, and a lot of the incentives would dry up

dil999

Lantus wrote: »

I was pricing a Nissan leaf the other day and their gmfv is around 26 percent!

On a 25k car it's 5500eu after 3 years....

On the plus side you will probably have equity but you have basically bought the car!

The rest of their range appears to have GMFV of 40%. It seems they are not confident in the potential resale value of leafs so.

Casati

dil999 wrote: »

The rest of their range appears to have GMFV of 40%. It seems they are not confident in the potential resale value of leafs so.

Too right, with a new model launched the current model will be a hard sell in three years, but again the resale value will be the same if you buy on pcp or buy it cash today

Casati

Casati wrote: »

...............

Resale value is determined by supply and demand, car sales don't seem to be at an artificially high level are are still way below boom times. For sure UK imports are driving down some...............

If a few cent/litre goes onto diesel over the coming budget or two there will be little demand for 3 year old diesel Passats etc if manufacturers continue with 0% finance etc on new models that aren't diesel.

dil999

Augeo wrote: »

If a few cent/litre goes onto diesel over the coming budget or two there will be little demand for 3 year old diesel Passats etc if manufacturers continue with 0% finance etc on new models that aren't diesel.

Its hard to know. The finance companies designing the PCP deals, obviously set the GMFV above what they would expect as a resale value. I would suspect that they have very good information to allow them calculate what the resale values are likely to be. They will then build in a bit of margin for error. If you start to see PCP offerings coming on the market that have GMFV of less than 40% for diesel cars, then I would be thinking that resale are more likely to drop.

In the end of the day as Casati said earlier the resale value of your car is the resale value of your car. It doesn't change if you pay using HP, PCP or just take a few grand from under the mattress.
The advantage of PCP though, is that I have a guaranteed minimum future value and if the whole second hand diesel market goes belly up, its Volkswagen bank's problem, not mine.

dil999

dil999 wrote: »

....................
The advantage of PCP though, is that I have a guaranteed minimum future value and if the whole second hand diesel market goes belly up, its Volkswagen bank's problem, not mine.

Which is why I reckon there'll be more supply than demand of 3 year old diesel yokes in 2/3 years time

dil999

dil999 wrote: »

.................. If you start to see PCP offerings coming on the market that have GMFV of less than 40% for diesel cars, then I would be thinking that resale are more likely to drop..................

These figures are from earlier in 2017.........

Passat Estate Trendline 1.4TSI 125HP
RRP€30,390
GFMV €11,846
38.97993%


Passat Estate Highline 1.6TDI 120HP
RRP€36,230
GFMV€14,182
39.14436%


Passat Saloon Highline 2.0TDI 190HP
RRP€38,320
GFMV€15,328.00
40%

VW diesel and petrol stuff already at 40% GFMV

A4 2.0TDI 150 ULTRA
€39,600
€17,825
45.01263%


A6 2.0TDI 150 SE
€45,350
€20,025
44.15656%


BMW 420i SE Gran Coupe
€45,350
€21,006
46.31974%

dil999

Augeo wrote: »

These figures are from earlier in 2017.........

Passat Estate Trendline 1.4TSI 125HP
RRP€30,390
GFMV €11,846
38.97993%


Passat Estate Highline 1.6TDI 120HP
RRP€36,230
GFMV€14,182
39.14436%


Passat Saloon Highline 2.0TDI 190HP
RRP€38,320
GFMV€15,328.00
40%

VW diesel and petrol stuff already at 40% GFMV

A4 2.0TDI 150 ULTRA
€39,600
€17,825
45.01263%


A6 2.0TDI 150 SE
€45,350
€20,025
44.15656%


BMW 420i SE Gran Coupe
€45,350
€21,006
46.31974%

The expectation is obviously that the BMWs and Audis have higher resale values in % terms. It will be interesting to check GMFVs this time next year and see if the VW diesel GMFVs are down at a lower %

Btw I don't think there will be any change in the price of diesel in the next budget. 70% of new cars sold in the last 3 years are diesel. Next year is likely to be an election year. Dáil seats take priority over the environment.