INDIRECT dealer expenses rose 20% YoY in Q1 alone. This is the alarming reality flagged by data developed by REALtime Communications Insights operation.
Director John Law is clear that the numbers point to challenging times ahead. He said: “While trade headlines continue to report on some impressive profit figures delivered over the last year, our benchmark data illustrates clearly that negative headwinds are building. The impact of spiralling inflation is being felt by consumers and dealers alike. For dealers, there is the double whammy of rapidly rising costs and rapidly slowing buyer demand driven largely by the accelerating cost of living.”
As dealers will recognise, the widely publicised gas Price Cap does not apply to businesses. As a result, energy suppliers are now passing on their costs to companies by increasing their business gas and business electricity costs. It means that the most recent Office for National Statistics (ONS) data on 12-month inflation rates, which saw rises of 95.5% for gas and 53.5% for electricity, being a low level of potential rise to a dealer unless they were already locked into lower deals.
The bright spot for dealers has been used cars. REALTime Communications data reflects an impressive Q1 performance with the benchmark data sourced from a broad range of many of the UK’s largest retailers;
- Used cars NET profit – rose a staggering 290% YoY, generating on average £102,000 per dealer in Q1
Used cars were also identified by the ONS as a notable contributor to inflation, rising 23.4%, according to their most recent data. However, this was a fall from a peak of 31% in March, a downward shift reflecting the fall in consumer confidence to a lowest-ever score in May and widely reported quieter sales activity since April.
Law added: “There is no magic formula to address the challenges. Dealers need to understand where they are to optimise performance and reduce costs. Benchmarking performance in stocking, used car pricing, aftersales activities and the promotion of added value retention services such as service plans, extended warranties and older car servicing are just some items that should be up for debate. In a market where marginal gains will be critical; benchmarking will be essential to isolate the areas for the action that for many will be needed now.”
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