Are new car sales figures a fantasy?

A recent report from Germany claimed up to 30 per cent of new car sales were a fiction. Could the same be true in the UK?

Despite the recession – and the lack of finance deals for a huge number of potential customers – new car sales in the UK seem to be rising inexorably.

Just this week we reported the latest figures from the SMMT which claim new car registrations in July were up by 9.3 per cent in July (2102) to 143,884, the fifth month in a row the SMMT has reported a sales increase, with a prediction that 1.97 million new cars will be registered in the UK in 2012.

The sales figures are very impressive – and a shining light of success in a pretty dismal business scenario in the UK – but are they accurate?

We’re not in any way suggesting that the SMMT massages the figures to make them look good, but just how many of those new ‘sales’ are to end users?

A report a couple of weeks ago from Germany suggested that as many as 30 per cent of all new car registrations weren’t in fact sales to end users, but pre-registrations by dealers and car makers.

Now some of those pre-reg cars are entirely legitimate. Many will be for demonstrators and other perfectly sensible reasons, but it seems many are being registered simply to hit sales targets set by car makers.

Dealers can unlock bonuses by hitting sales targets, and those bonuses can, if the dealer is smart, be worth more than the price drop needed to sell on the pre reg cars at a discount. But they do skew the new car sales figures quite dramatically.

So we’ve spent the last couple of weeks chatting to dealers (none of whom were willing to go on record) to see if the situation in the UK is similar. And, from what we can see, the UK new car sales figures seem to be about as skewed as the German ones, with as many as 30 per cent of new car sales in the UK also being ‘Pre-Reg’ cars.

So how does this rising trend for pre-reg cars affect the consumer?

Arguably, it’s a positive, especially for car buyers willing to seek out pre-reg cars instead of speccing up their own new car. With discounts of 25 per cent or more on the list price of pre-reg cars, new car buyers can get a terrific deal.

The downside is for car buyers who go the normal route and buy at list price (or a small discount) for the exact car they want. They’re buying a car that will drop in value immediately to the level of the pre-reg cars. Not necessarily a huge problem if you keep your car a few years, but punitive if you chop and change regularly.

So what’s the solution?

Perhaps more transparency in new car sales figures is needed? Maybe the SMMT should start publishing figures for end user and pre-reg sales? That would at least be accurate, although the risk is that car sales would fall if more car buyers realise they can buy a ‘new’ car at a huge discount, leading to over production and a decline in the UK’s strong car market.

But for now, car buyers should be seeking out pre-reg cars as the primary source for their new car and not be quite so picky about spec. Ultimately, that would force more transparency in the figures and see substantial price drops from car makers.

Because at the moment, buyers who opt to spec up their new car are probably paying at least 25 per cent more than a transparent market would allow.