New cars and young used ones
Cars could become cheaper again
11/11/2022 7:13 am
Anyone who wants to buy a new car has many reasons to hesitate. Dealers notice that too. Demand is falling, although manufacturers have their supply problems under control. This could affect prices.
Buying a car could soon become more affordable again for consumers. At the moment, new cars and young used cars are still extraordinarily expensive because the car manufacturers were slowed down in production for a long time. But now car dealers and industry experts are seeing signs of a trend reversal: Production is running better, but customers are holding back. “We are now seeing a significant decline in private demand – both for new and used cars,” says Thomas Peckruhn, Vice President of the Central Association of the German Motor Trade.
Stefan Reindl, Director of the Institute for the Automotive Industry, says: “Demand is falling.” The industry association VDA registered a good third fewer domestic orders in October. And just a few days ago, the President of the VDIK importers’ association, Reinhard Zirpel, warned: “Customers’ reluctance to buy could soon again cause problems for the market, as could tight supply chains.”
The cuts in subsidies for electric cars and the rising fuel prices have completely unsettled customers, says ZDK Vice Peckruhn, who owns a group of car dealerships. In addition, “in the face of the crisis, many people currently want to keep their money together.” The market observer DAT also states that purchases such as buying a car would be considered more carefully. “People simply don’t know yet whether or how long their own money will last,” said a spokesman. Many buyers also waited, “in the hope that the prices for used cars and also for fuel will fall again”.
Discounts could return
This is not yet visible in the figures. The residual values collected by the DAT have been stagnating for about six months, in September there was an all-time high for three-year-old petrol engines. And for new cars, according to the market observer, at least the list prices have risen by a good fifth since the beginning of 2019. However, the list prices of the new cars do not yet say how much is actually paid in the end. And industry expert Ferdinand Dudenhöffer recently noted rising discounts again.
At the moment, the falling demand is still being masked by the high order backlog, says Reindl. But what does the current change mean for car prices? Dudenhöffer recently said: “The time for discounts is coming back.” And Reindl also says: “I don’t think that the manufacturers have said goodbye to their discount policy in the long term. When the current crises are over, price competition will increase again. Simply because the manufacturers want to use their factories to capacity.”
But there are other assessments. Peckruhn sees the maximum that has been reached with used vehicles, but he doesn’t expect any relapse into “old price wars” for new cars – in other words, high discounts. Car manufacturers make similar statements: Audi CFO Jürgen Rittersberger expects demand to be even greater than production next year. As a result, prices remain consistently high. When presenting the quarterly figures, BMW CFO Nicolas Peter also spoke of stable prices in the coming year.
Workshops are busy
The DAT also mentions another factor that will make the purchase of a new car more expensive for some customers: rising interest rates make financing more expensive. The days of “very cheap and heavily subsidized leasing and financing rates” are over for the time being. If you don’t buy a new car, you’d rather have your old one repaired: The car repair shops are very busy, says Peckruhn. The car trade was “very good at compensating for the burden of Corona”.
Reindl also says that the trade has “earned relatively well – also thanks to measures such as short-time work and the profitable used car business”. Last year there were even slightly above-average returns. Nevertheless, according to Reindl, large trading groups are taking over more and more smaller competitors. By 2030 he expects only 3850 independent car dealerships in Germany. In 2020 there were still 6,800, at the beginning of the millennium even 18,000. “The dealer networks are shrinking and being thinned out, especially across the board,” he says. But he doesn’t expect it to disappear: “Manufacturers can’t do without a network of dealers.” Not everything works online – “especially in the service area”.