Customers may benefit from dealers’ depreciation woes

Next month’s registration change will be a learning curve for the motor industry, especially when trying to assess the second-hand value of a car bought in the first six months of the year, as distinct from the value of a car bought in the second six-month period. In the fleet sector, for example, the change will have virtually no impact. Fleet companies do not buy in the last quarter of the year, anyway, preferring to wait for new-year registrations.

"We have done some initial analysis and we don't think it will make any real difference. We are not as dependent on the first quarter of the year for business as garages are, and we change through the year, but we don't take in cars in the last three months of the year. If we did, we would have a four year-old car in three years and three months, as distinct from a three-year-old car," says David Wilkinson of Merrion Fleet.

Things are a lot less certain in the retail sector. “Personally, I don’t think a few weeks between the first part of the year and the second should have a big impact on the second-hand value of a car if it’s in good condition and has the right mileage,” one dealer says ruefully. “The chances are, though, I am going to have to give way on the price because customers will drive the demand. It could mean having to give maybe €500 discount on a car registered in the first six months. Customers are focused and not easily parted from their money.”

One area in which customers may well benefit in picking up better value on second-hand cars is that of pre-registration models. Officially, these cars are known as demonstration models, and the industry does not admit to pre-registering cars to artificially support the market. As a result, garage forecourts are populated by cars that have been registered and had small mileage clocked up. There are lots of them around and they now account for between 10 and 15 per cent of all new cars registered.

From next month, they will be joined on the forecourt by even more cars – this time with 132 registrations – and that glut may represent a good opportunity for customers to press for a better deal where they can. A car dealer may argue that there is little difference in the value, but the customer could use the industry’s own desire for the dual registration system to their advantage. On the other hand, dealers may try to add a premium to the value of a 132 registered car to make up any difference lost on a 131 registration. In a seriously depressed market, however, it is unlikely that customers will not have the upper hand in many deals.

Another factor that may make a difference in second-hand values is the return of rental cars that garages take back in September. Many distributors have been heavily involved in hire-drive to boost registrations, and will be filtering these cars back into the system after the main tourist season.

Second-hand car sales have been strong this year and demand is being driven by a shortage of good-quality cars. In 2008 and 2009 the new market was beginning a serious decline and the effects of this are being seen today. It is interesting to note the high level of second-hand imports that reflect this shortage: last month 5,937 new cars were sold while 5,035 second-hand cars were imported into the State.

Some industry analysts, such as Aidan Timmons, the research analyst for Motor Trade Publishers, speculate that the difference in value between 131 and 132 cars may have a "neglible long-term effect" on residual values because of this continuing shortage of good-quality used cars. He points out that the difference in value between the two plates may exist, but "only to an extent that the mileage on the car affects the value."

So, when dealers presumably take delivery of more demonstration (pre-registered) cars next month to get them up to the 132 profile, they may have a difficulty in trying to shift cars with the older registration. How they manage their valuations on both remains to be seen.

It would appear that September might see market values a little more settled and of more advantage to buyers, as the hire-drive cars come back. There will certainly be plenty of choice available compared to this part of the year.