Automotive Industry Digest

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Cash rules as part-exchanges fulfil a quarter of dealer forecourt requirements

Dealers are overwhelmingly opting to use stocking plans and their own capital for stock acquisition and nearly one in four part-exchanges are retained for resale according to the latest dealer insight survey from Manheim.

Three in every four (74%) dealers say they use their own capital to finance new forecourt stock, while one in five (20%) say a stocking plan is their preferred funding method for vehicles bought at auction. Only a tiny minority (4%) say they use interest-attracting finance.

The insight was collected via Manheim’s monthly sentiment survey, which takes the pulse of over 240 dealers every month.

Manheim’s Philip Nothard comments: “That the vast majority of dealers are funding auction purchases with their own capital or stocking plans indicates good liquidity amongst the buyer community and strong days to sell ratios.

Cash tied up in stock will strangle even the best of businesses and stocking plans make particularly good sense when days to sell average around 45 days.

“Stocking plans are a comparatively new product so it’s encouraging to see one in five dealers saying they’re already their preferred source of capital. This correlates with the consistent growth experienced by NextGear Capital, Cox Automotive’s wholesale stock funding business.

“There’s no doubt it’s a challenging market right now and margins are hard earned, but this paints a positive picture and correlates with the general trend we’re seeing in the used car sector.

This latest survey also asked dealers about what they do with part-exchanges. One in four traded cars are retained by 85% of the dealers questioned, while over half (56%) say they retain between 26% and 49%, and one in five (22%) retain three-quarters of all vehicles they acquire through a part-exchange deal.

All of the dealers participating reported they retain at least some part-exchange stock for resale.

“This simple insight supports our view that continued consumer appetite for PCP deals and low interest rates are playing an important role in driving good quality, under three-year-old stock into the used market. Near-retail ready stock is very attractive for dealers and with demand for used vehicles strong, trading customers into a new vehicle is an attractive means to replenishing sold forecourt stock.

“I think it also supports a notion that many dealers are becoming increasingly diverse in terms of their used vehicle portfolio and are holding the view that all saleable stock is good stock. This will no doubt be leading to keen offers to secure that business.”

Automotive Industry Digest

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