Jump starting the car sales industry

One of the most reliable bellwethers to how well any economy is doing is the car sales business.


Summer hopes to jump starting the car sales industry

car showroom

When people are doing better and generally feel more confident in their current and future prospects then they’ll be more likely to consider buying a new car or used car.

 

Similarly if their personal circumstances are changing and they need to look at buying first cars for their growing families or changing down to smaller, less powerful cars themselves as they get older and do less long distance driving. 

 

No matter what their circumstances are, there’ll be a car dealership that will be focussed on meeting their needs. 

 

But the coronavirus pandemic and the year of lockdowns waylaid any hope for a normal trading year in 2020 – for the automobile industry and many others related to it. 

 

So what is the current state of play for new car dealers and second hand car sales specialists? 

 

Are they looking forward to 2021 with hope or do they fear that by the time the public feel confident enough to start looking at buying or leasing a car again, it will be too late for smaller, independent dealers? 

 

Have debts but want to keep your business open? A CVA could be the solution

 

The latest monthly sales figures from The Society of Motor Manufacturers and Traders (SMMT) show an industry that’s beginning to bounce back. 

 

Last month there were 141,583 new vehicles registered – which was a huge increase on the corresponding total from April 2020 when only 4,321 vehicles were sold. The lowest recorded total since February 1946. 

 

Apart from the collapse in demand as the first lockdown commenced, many manufacturing plants ceased production while showrooms closed their doors to the public alongside them.  

 

New and used car dealerships were finally able to reopen to the public from April 12th in England while the subsequent growth of delivery, click and collect websites and other online services helped car purchases to recover some of their previous strength. 

 

The sales total, while encouraging, is still down 12.9% on the average for the month when comparing sales figures for the previous ten Aprils.

 

SMMT Chief Executive Mike Hawes said: “After one of the darkest years in automotive history, there is light at the end of the tunnel. 

 

“A full recovery for the sector is still some way off, but with showrooms open and consumers able to test drive the latest, cleanest models, the industry can begin to rebuild.”

 

If the future looks brighter for the industry as a whole, the present provides more pressing problems for a lot of car dealers. 

 

Apart from inventory issues as the manufacturers begin to ramp up again to meet demand, there is also the issue of home working to contend with. 

 

Less commuting between cities and home means a new car becomes less of an essential purchase and the very idea of a company car loses its lustre if office attendance isn’t mandatory anymore and sales meetings can be conducted via the internet. 

 

The pandemic has also forced many families to consider their own financial situation and may have decided that while there will be an immediate uptick in going out and spending once lockdown restrictions are finally lifted, the economic picture in the medium term is more mixed. 

 

So much so that the lack of wear on their current car means that it can be kept for an additional year or two rather than be traded in and upgraded. Which while making perfect sense to them, will further damage the balance sheets of used car dealers in particular. 

 

There’s also the issue of government economic support ending shortly for businesses as the staff furlough scheme is withdrawn in September and repayments for the bounce back loan scheme (BBLS) start to come due this month. 

 

Combined with the imminent lifting of restrictions on creditor actions such as winding up petitions and statutory demands, for car businesses that already owe money and will struggle to service existing debts, this could be the toughest period to get through, just when the idea of a recovery becomes tantalisingly tangible. 

 

Should I be worried about wrongful trading when I open my business again?

 

Sadly, some car dealers might not have a clear lane to be able to viably trade their way back to profitability even if all lockdown restrictions were to end tomorrow.

 

If the sums just don’t add up for them, then there are several insolvency options such as liquidation that they could consider to help close the business efficiently, even if they’ve taken out BBLS loans or owe large amounts to different creditors including HMRC

 

Closing down an automotive business is essentially the same as any other business and we can guide you through the process at every stage.

 

This could leave you free to start a new car dealership or move into a different sector altogether. 

 

Alternatively, if there’s a real and credible path back to solvency then administration might be a better solution.  

 

It will buy the dealership valuable time to look at different options to restructure its debts and bring in new finance through selling some assets or other methods. 

 

During this time, creditors won’t be able to pursue the business which might be all a dealership needs to get back on its feet just in time for a hopefully Covid-free summer. 

 

If you’re in the motor trade and feel your company needs a financial tune up then you should get in touch with us. 

 

After a free initial consultation with one of expert advisors, you’ll have a clearer idea of what you can do – right now – to drive the business forward to where you want it to be. 

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