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'Pre-reg' cars now widespread in UK 'Pre-reg' cars now widespread in UK
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Up to a fifth of new cars in the UK are not sold direct to consumers, or used as fleet, but are instead pre-registered to dealers, a BBC investigation has found. Up to a fifth of new cars in the UK are estimated to be "pre-registered" to dealers - potentially skewing sales figures and leaving drivers confused.
The cars are then sold second-hand to the public at bargain prices. These cars are surplus stock sold cheaply to dealers who keep them before selling on to customers at discounts.
Some experts say high levels of pre-registrations indicate new car sales are not as robust as they appear and some dealers are feeling the pressure. Some dealers say pre-registering is "like a drug" used only to hit their sales targets, a BBC investigation has found.
A survey for the BBC has found around half of buyers are confused by pre-reg. The industry says the system allows dealers to manage stock efficiently.
Motor suppliers trade body, the Society of Motor Manufacturers & Traders (SMMT), admits demand for brand new cars is beginning to "stabilise". Cheaper prices
Secret Pre-registration is legal but unofficial, so it is often referred to in the motor trade as the "secret of the car industry", an investigation by BBC Radio 4's You and Yours has found.
Pre-registration is legal but unofficial, so it is often referred to in the motor trade as the "secret of the car industry", a You and Yours investigation has found. The cars are sold cheaply by suppliers to dealers, who then register them under their own business name.
The cars are surplus stock, sold cheaply by suppliers to dealers, who then register them under their own business name. In effect this means they become the first owners of the cars.
After being kept off the road for 90 days the cars can then be sold to consumers, typically at discounts of 20% and more. After being kept off the road for 90 days, the cars can then be sold to consumers, typically at discounts of 20% and more.
Trade bodies and government agencies do not collect an official record of the number of cars pre-registered by dealers, which are often classified in SMMT figures as 'fleet.' A key reason there are so many pre-registered cars is that they are often the only way dealers can achieve monthly sales targets set by manufacturers, You and Yours has found.
The SMMT's fleet category is up 5.4% so far in 2016 compared to private new car registrations, which have stalled. If dealers miss targets they risk losing monthly bonuses from the manufacturers.
The SMMT collects figures for pre-registrations made by manufacturers, in accordance with the Supply of New Cars Order 2000, which regulates the industry. James Baggott, editor of Car Dealer magazine, said that for many, pre-registration was out of control.
However this is only around 2,000 cars per year. "I refer to it as a drug but only because that's how a lot of dealers refer to it themselves," he said.
Big result "One you are hooked into it, it is very hard to get off it."
Motor industry analysts Cap HPI conducts a regular survey of 200 UK car dealers. One car dealer, who asked to remain anonymous, told the BBC he had become dependent on pre-registering cars as he had such narrow profit margins.
Philip Nothard from Cap was surprised by the results of his most recent poll. "You need to do it to get the bonuses but the more pre-reg you have the harder it is to shift new cars," he said.
"It was a bigger result than we were expecting and bigger than we've seen before. "It's a vicious circle and can create cash flow problems."
"40% of dealers expected September's pre-registration figures to be between 11- 20% of the total new car market and more than a fifth expected volumes to exceed 21%. But Tamzen Isacsson, of the Society of Motor Manufacturers & Traders (SMMT), which represents the industry, said: "Let's be clear. This is driven by natural business demand and consumer choice.
"That would equate to almost 100,000 pre-registered cars in one month." "Self-registrations enable dealers to manage their stock."
Nigel McMinn, managing director at dealer group Lookers supports Cap's findings. Buying a pre-registered car can be cheaper for drivers, but many do not understand the system and there are also pitfalls - not least that some buyer protection has evaporated.
"About 10-15% of the UK new car market is self registration - speculatively-built cars which need to find a home." Some 44% of car buyers did not know what "pre-registered" meant, according to a survey for the BBC by Auto Trader of 1,000 of its readers.
Chairman and managing director of Ford of Britain, Andy Barratt, told the BBC "pre-registrations are inevitable." Best offers?
Experts have told the BBC that in the long term, the falling value of the pound could lead car manufacturers to ship fewer surplus cars to the UK. About 55% incorrectly thought the warranty on a pre-registered car would be either the same or longer than for a conventional new vehicle.
Transparency
James Baggott, editor of Car Dealer magazine has a different interpretation of the current figures.
"We're constantly talking about how buoyant the car market is.
"But pre-registered cars are inflating the real car market: they're often just sitting in a field somewhere.
"I would say that isn't transparent enough because a number of people use the car industry as a bellwether for the economy."
But Tamzen Isacsson from the SMMT insists the UK market is "buoyant."
"Self registration is a normal part of a functioning car market.
"It enables consumers who don't want to wait months for a new car to be able to access one immediately and with a very low mileage."
Consumer confusion
Buying a pre-registered car can be a bargain, but there are also pitfalls.
Research for the BBC suggests many consumers are unaware of the potential hazards.
A poll of 1,000 readers by Auto Trader found that 44% of car buyers did not know what "pre-registered" meant.
About 55% thought the warranty on a pre-registered car would be either the same or longer than for a conventional new vehicle.
"It could be that a pre-registered car has been sat on a retailer's forecourt for six months so that would mean six months of the manufacturers' warranty would have expired," said Jon Quirk, editor-in-chief at Auto Trader."It could be that a pre-registered car has been sat on a retailer's forecourt for six months so that would mean six months of the manufacturers' warranty would have expired," said Jon Quirk, editor-in-chief at Auto Trader.
"Your car won't technically be new because your name won't be the first in the logbook."Your car won't technically be new because your name won't be the first in the logbook.
"And if you're buying on a leasing deal, you may find that the very best offers are only available on brand new cars.""And if you're buying on a leasing deal, you may find that the very best offers are only available on brand new cars."
A 'drug' In response, Ms Isacsson, of the SMMT, said: "It enables consumers who don't want to wait months for a new car to be able to access one immediately and with a very low mileage."
Car dealers say pre-registrations can help them achieve monthly targets. There is also concern that the pre-registration market could skew new car sales figures, as they are not actually on the road.
Scott Kershaw works for a large Manchester dealership and has a positive view. Motor industry analysts Cap HPI said its research suggested the numbers were growing, and could total as many as 100,000 cars in one month.
"If you hit a certain number of cars and register a certain number of cars it can be very beneficial," he says. In a survey of 200 dealers, 80 predicted that pre-registered vehicles in September would account for 11% to 20% of the new car market. A further 52 expected them to account for 21% or more of the market.
Others say pre-registrations can pile on the pressure. For example, Nigel McMinn, managing director at dealer group Lookers, said: "About 10% to 15% of the UK new car market is self registration - speculatively-built cars which need to find a home."
A dealer who asked to remain anonymous told the BBC he was too dependent on pre-registered cars. Trade bodies and government agencies do not collect an official record of the number of cars pre-registered by dealers.
"We're making margins of just 1%. Instead, the SMMT records the sales as "fleet" vehicles bought by a business.
"You need to do it to get the bonuses but the more pre-reg you have the harder it is to shift new cars. James Baggott, editor of Car Dealer magazine, said: "We're constantly talking about how buoyant the car market is.
"It's a vicious circle and can create cash flow problems." "But pre-registered cars are inflating the real car market, they are often just sitting in a field somewhere.
James Baggott, editor of Car Dealer magazine says pre-registration can get out of control. "I would say that isn't transparent enough because a number of people use the car industry as a bellwether for the economy."
"I refer to it as a drug but only because that's how a lot of dealers refer to it themselves. But Ms Isacsson, of the SMMT, said: "Self-registration is a normal part of a functioning car market."
"One you are hooked into in, it is very hard to get off it." Listen to the full story on BBC Radio 4's You and Yours at 12:15 BST on Friday
Louise Wallis from the National Franchised Dealers Association says her members generally deal with pre-reg well but are never fully in control. Have you bought a pre-registered car? You can share your comments and experience by emailing haveyoursay@bbc.co.uk.
"It's always going to be difficult when you've got a strong supplier with a not so strong, more disparate retail sales network." Please include a contact number if you are willing to speak to a BBC journalist. You can also contact us in the following ways:
But Ms Isacsson of the SMMT rejects the charge: "Let's be clear. This is driven by natural business demand and consumer choice. Or use the form below
"Self-registrations enable dealers to manage their stock."