According to the latest dealer insight survey from Manheim, dealers are overwhelmingly opting to use stocking plans and their own capital for stock acquisition, with nearly one in four part-exchanges retained for resale. The insight was collected via Manheim’s monthly sentiment survey, which takes the pulse of over 240 dealers every month.
Three in every four (74%) dealers say they use their own capital to finance new forecourt stock, while one in five (20%) say a stocking plan is their preferred funding method for vehicles bought at auction. Only 4% say they use interest-attracting finance.
“That the vast majority of dealers are funding auction purchases with their own capital or stocking plans indicates good liquidity amongst the buyer community and strong days to sell ratios. Cash tied up in stock will strangle even the best of businesses and stocking plans make particularly good sense when days to sell average around 45 days,” said Philip Northard from Manheim.
Stocking plans are quite new on the market; therefore the results of the insight are encouraging. “There’s no doubt it’s a challenging market right now and margins are hard earned, but this paints a positive picture and correlates with the general trend we’re seeing in the used car sector,” added Philip.
Moreover, the survey also looked into what the dealers do with part-exchanges. One in four traded cars are retained by 85% of the dealers questioned, while over half (56%) say they retain between 26% and 49%, and one in five (22%) retain three-quarters of all vehicles they acquire through a part-exchange deal. All the participating dealers reported they retain at least some part-exchange stock for resale.
“This simple insight supports our view that continued consumer appetite for PCP deals and low interest rates are playing an important role in driving good quality, under three-year-old stock into the used market,” concluded Philip.
