With new sales grinding to a halt, luxury dealers will have to treat used-car customers with respect, writes DONAL BYRNE
SHORTLY BEFORE Christmas, sales manager of Mercedes in Ireland Ciarán Allen made a rather stark and surprising admission. If Mercedes dealers were going to make any money in 2009, it was going to be from servicing and after-sales.
Allen, like others in the car industry, knew on the basis of orders for new registrations in January that new car sales were grinding to a halt and that the luxury sector would be hurt more than any other. His comments were among the first from senior motor industry figures that confirmed the end of the Celtic Tiger period and the record sales that it brought.
Now the focus is on second-hand sales. Dealers in the premium sector are becoming desperate to replace their now defunct new car sales business by targeting customers who are holding onto their money but may also be in the market for changing their cars.
While figures on premium second-hand sales so far this year are scant, customers are proving cautious and many in business don’t want to be seen driving a brand new car for fear of sending a message of ostentatiousness.
Another complicating factor is that many people are driving relatively new cars that simply do not need replacement, thus allowing the owner to weather the storm for at least a few years.
“With all the depressing news about, there is a fear of consumption and it is not seen as prudent to be buying a new car. That is why premium used cars are now critical to our business,” says Aidan Connolly, marketing and customer experience manager of Lexus Ireland.
As has happened in other markets, notably those in the US and the UK, the second-hand buyer has become king in today’s Irish market.
“Customer service is part of our DNA and retention of customers is crucial and that is why we are treating used cars as new cars. For the customer buying a used car it is a new car and that is way it should be. Every handover of a car at one of our dealers’ premises is the same as for a new car,” says Connolly.
For the first time, dealers are being encouraged to treat their second-hand and import customers with a good deal more respect. “You can’t afford to look down your nose at someone who has imported a car and comes in to you for a service.
“As sales people have suddenly been forced to start selling instead of taking orders, so dealers are being forced to have a new respect for anyone at all who walks into their premises and looks like they will spend money – no matter how little or on what.
“If you don’t bend over backwards for people, you had better consider the future of your business,” concedes one dealer who admits to past complacency.
“Second-hand sales are becoming a lifeline for our dealers,” says Michael Nugent, sales manager of BMW in Ireland. His company is one of the most affected by used imports from the UK and, because it is a subsidiary of BMW in the UK, it has started importing its own second-hand stock from Britain with prices close to those one would pay to import a car privately.
The logic, as it is for other companies, is to get customers back and hold on to them.
“There was an attitude that imports were not welcome at BMW dealers here, but we are actively going out to get customers back in terms of servicing and so on and we are hoping that when the time comes they will come back and buy from us instead,” says Michael Nugent.
One of BMW’s dealers, Raymond Conlon in Rathangan, Co Kildare, has seen almost the entire market move from new to second-hand options.
“Between the economy and the value of sterling encouraging imports, the coin has flipped. Finance is a lot tighter now, too, so there’s not much point in trying to get out there and look for new car business.
“I am concentrating on trying to compete with the imports bought in sterling by offering good value, a two-year warranty and 200-point BMW check on every car I am selling.
“If I sell a car that does not meet the requirements of the 200-point check and a customer has to bring it to another garage after 2,000km, I am jeopardising my dealership for BMW.
“I am trying to sell a complete package – I think people will appreciate that,” he says.
The reality of the new car market for premium dealers is now clear. By Christmas of 2007, Raymond Conlon had orders for 180 new cars. Last Christmas, he had 50 orders. Dealers have seen the footfall into their premises reduced to the odd amble and second-hand business will probably be the only way that many of them can stay in business.
So, in the new climate you should expect an elevated level of service, good deals on second-hand cars with competitive warranties and back-up and a greater effort to ensure you return in the future.
If you don’t find these things, then you are definitely at the wrong dealership.
Testimony: Second-hand value
MORE THAN most drivers, Philip Cullen was discovering the cost of changing and updating his car was more than he could reasonably afford.
A self-employed businessman who imports batteries for a living, he drives between 50,000 and 60,000km a year. Having bought a new BMW 525 diesel in 2005, he soon discovered that buying new did not make as much sense for him as it might for others with lower mileage.
"Because of my mileage, I was taking a very big hit on depreciation and I was forced to consider running the 5 Series into the ground because of the cost of change. Then, two years ago I decided to go for a good second-hand and bought an X5 on the basis that I could average out the mileage over a longer period."
When he went to trade-in his X5 he says the cost of change through his BMW dealer, Raymond Conlon in Rathangan, Co Kildare, was €12,500 less than he would have paid otherwise.
"He knows what I want and that I am prepared to go back to him within two years to change if I'm happy."
He considered buying from the UK but decided a good deal here with a two-year warranty and breakdown cover was worth more to him. "I have never had a problem with my current car [a second-hand BMW 730D] but I did get a stone in a brake disc one night at about 11pm. The service line got a truck out to me straight away."
He strongly recommends the second-hand option. "The car I have now is exactly like a new car but someone else has already taken the depreciation hit. I have a great warranty and a full guarantee and I get a fair deal on the trade-in."