What does Q4 2022 and H1 2023 have in store...

When the pandemic struck in 2020, no-one could predict quite what would happen.  We at VAS were anticipating dealer struggles, emergency audits and dealer failures.  Thankfully, these didn’t happen.  

Government support and the ability for dealers to adapt to a new reality where on-line sales became the norm meant for many dealers that the balance sheet looked healthier than ever as they serviced the pent-up demand for vehicles sales.  For the larger franchised dealers, the challenges around new vehicle production were also met with new methods of adaptation, with a focus on used car sales.  Even the odd sight of vehicle values increasing each month at unheard of rates was turned into a positive, with customers wanting to trade up their cars that were now worth several thousands of pounds more than they were just a few months before.

Whilst this does sound extremely positive – and it was – things are now changing, and we hear this not just from our customers, but also from the dealers themselves.  Unfortunately, consumer confidence has decreased, and people are starting to question whether now is the right time to change cars and likely take on extra debt, particularly as borrowing rates have increased. As a result, footfall at dealers has steadily declined.

This challenge is further compounded by the fact there is also a genuine supply issue.  New car production is still impacted with long waiting times, and we see evidence that the availability of good quality used stock is at a premium. Of course, you need customers and stock to offer them if you intend to sell cars! So, what does this mean for the remainder of 2022 and 2023?

As previously stated, we have no doubt that the market will continue to evolve, and dealers will find ways to adapt and ultimately survive. Some, in fact, will do rather well.  However, the combination of economic uncertainty and lack of supply will likely create a harsh operating environment for dealers. As such, at VAS, we are anticipating an increase in dealer failures and, in turn, the need to continue to work closely with clients to monitor dealer health.  We know from experience that, for many dealers, there is a fine line between survival and failure. Therefore, proactive risk management is vital.  Equally, when things do go wrong, we stand by to respond immediately to protect our client’s assets.