Tuesday, June 13, 2017
Fleet sales have supported the growth of the new car market in recent months. How can motor traders take advantage of this trend?
Britain’s new car market remains buoyant, despite the introduction of sweeping tax changes. The sector achieved its biggest month on record in March, as buyers hurried to complete car purchases ahead of a major Vehicle Excise Duty (VED) shake-up.
While Brexit uncertainty has failed to dent growth so far, it’s perhaps fleet customers rather than consumers who motor traders should thank…
VED reforms fuel March growth
A total of 562,337 vehicles were registered in March, according to the Society of Motor Manufacturers and Traders (SMMT [SC1] ), as the new car market posted a record performance.
Data compiled by the trade body points to an 8.4% expansion, with the Ford Fiesta, Ford Focus and Vauxhall Corsa the three best-sellers.
Registrations were more than double the combined figure for January and February, suggesting the market benefited from the Government’s VED overhaul. The reforms mean many new cars will now be subject to a flat VED fee of £140, with only zero-emission models exempt. However, they only apply to cars registered after April 1 [SC2].
Mike Hawes, chief executive of the SMMT, said: “These record figures are undoubtedly boosted by consumers and businesses reacting to new VED changes, pulling forward purchases into March, especially those ultra-low emission vehicles that will no longer benefit from a zero-rate fee.”
So which types of cars were people buying in March? Alternatively-fuelled vehicles continued to prove popular, with registrations climbing 31%. Elsewhere, petrol cars rose 13.2%, while diesel registrations also increased markedly – despite growing scrutiny of their environmental impact.
The very latest SMMT figures, for April, are less encouraging, as new car registrations dropped by almost 20%. However, the organisation has emphasised that this was largely down to people bringing their purchases forward into March and fewer selling days because of Easter [SC3]. Looking at the year to date, it said the new car market remains strong, with registrations climbing by 1.1% overall between January and April.
Defying economic uncertainty
In the face of Brexit and heightened economic uncertainty, the new car market has held up well in recent months – despite the turbulence caused by the VED changes in April.
March’s 8.4% jump in registrations followed growth of 1.4% in October and 2.9% in both November and January. Leaving April’s anomaly aside, even when registrations have fallen, as they did in December and February, the declines have been limited – amounting to just 1.1% and 0.3% respectively [SC4].
For many motor traders, these figures will be a cause for celebration. But there is one potential fly in the ointment: the market’s reliance on fleet customers to support growth…
Fleet customers dominate sales
At first glance, the SMMT’s October-March research hints at a strong appetite for new cars. Yet a closer look at the data reveals it is fleet customers who have frequently propelled the market forward, with consumer demand more hit and miss.
While registrations among private buyers climbed 4.4% in March, the growth rates were significantly higher among fleet and business customers, standing at 12.6% and 11.9% respectively.
This continues a trend which goes back to the autumn. For example, fleet registrations rose 4.2% during October, in contrast to private buyer registrations which fell 1.1%. Fleet sales made up more than half the market in November, whereas private buyer registrations dropped 1.2%. While in February, fleet registrations jumped 3.3%, while private sales slumped by 4.4%.
Adapting to new trends
The new car market continues to demonstrate impressive resilience, easing concerns about its ability to withstand sudden economic shocks. Yet behind the positive headlines is the reality that fleet registrations have at times propped up sales in recent months.
To take advantage of this trend, motor traders could look to diversify their services, catering for fleet managers as well as members of the public. With consumer confidence expected to be volatile as Brexit takes shape, offering fleet services might make up for fluctuating demand among private buyers.
But before branching out into new areas, motor traders should always check they’ve got the right insurance in place. Specialist policies are available, covering areas such as public liability, sales indemnity, personal accidents and business interruptions.
NIG can steer you right
At NIG we offer a wide portfolio of products to cater for a variety of businesses, including two products that are specially designed for the needs of Motor Traders, and which provide cover for the areas mentioned before.
Our Motor Trade policy offers embedded engineering breakdown cover within our Material Damage All Risks & Business Interruption sections, Legal Expenses cover, and flat-rated engineering inspection cover rated per premises (optional).
As well as the Material Damage All Risks, Business Interruption, Legal Expenses and Engineering Inspection sections noted above, our Motor Trade policy also includes, as standard:
These sections may be extended further to provide MOT Loss of Licence, Loan and Hire (whilst repairing a customer's vehicle) and Unaccompanied Demonstration.
Our Motor Traders Combined policy is designed for companies in the motor trade industry that need comprehensive cover across a range of locations. Our policy offers 'floating items', which means one Sum Insured provides cover across all business locations.
Key features include Uninsured Loss Recovery as standard within Road Risks Section, Indoor Exhibition cover of up to £500,000, and New Vehicle concession both for Insured and Customers' vehicles.
Motor Traders Combined even includes Unaccompanied Demonstration and Loan & Hire (whilst repairing a customer's vehicle) as standard. Trading Motor Traders Combined regionally, also means you have access to expert local underwriters based in one of NIG Regions across the country.