www.volkswagen.co.uk/en/legal/mdp-explained.html
VW have now introduced their new Agency model for selling their electric cars. Effectively you will in future have to buy direct from VW and not the dealer. This will enable VW to set a fixed price nationwide. The list price is what you will pay with no possibility of haggling with the dealer for a discount or using DtD or similar.
I expect other manufacturers will go down the same path.
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I thought this guys take on the used car car market in 2024 quite interesting:
www.youtube.com/watch?v=nAoY6BSGVRg
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This bit isn't good:
Can I still part exchange my existing vehicle....
Yes you can, however there are some changes to the process. Volkswagen UK will not purchase your part exchange car, your retailer will discuss this with you as the valuation you are provided will be an arrangement between yourself and retailer, and not involve Volkswagen UK. The proceeds can still be put against the value of your new vehicle in full or in part (as agreed with you) and the retailer will pass your agreed funds directly to Volkswagen UK on your behalf.
If the retailer goes bust between taking your car and paying VW then you could lose out. This is what happened when Datsun dealers went bust in the '80s Octav Botnar refused to honour deposits paid to the dealers. S75 cover may not be applicable either as there won't be a direct link between the sale of the PX and the purchase of a new car.
I know you could lose out dealing directly with a dealer but this extends the chain - adding risk.
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And of course, one could decide not to buy a VW.
The cliche "built like a Volkswagen" has been shown to be exactly that. Buy a car from those nice, Far Eastern people. They are far more reliable, anyway.
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Ultimately you can't manipulate a competitive market to a high degree.
We'll soon see fantastic lease deals and bespoke discounts (eg for NHS staff) sneaking in, 0% deals, enhanced trade-in prices, etc etc.
Can get a brand new LEAF 40 for £20k, an MG4 64 or MG ZS 73 for £26k from brokers right now.
ID3 starts at £36k.
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Interesting doing a search on auto trader for Leafs.
It is obvious to see what ones are either ex rental or huge discounts, and those that dealers have sat with and are determined to try and get money for.
Eg. 2020 tekna 15k miles £16000
2023 (73) n-connecta 1k miles £18k
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>>
>> I expect other manufacturers will go down the same path.
>>
...others are already there.
Volvo (in the UK) for instance. I have no personal experience, but forum posts indicate it isn't going well (exacerbated in part by supply-line problems - cars have been bought and built, but a shortage of delivery drivers and port storage for the backlog is causing much disturbance).
I believe Mercedes have been using the model for over a year now.
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The average new car showroom + staff is an expensive overhead. Simple observation - most of the time staff greatly outnumber customers.
Most new cars are leased or PCP. Cars are becoming like white goods - more expensive but with little to differentiate similar products. Servicing may be as little as once every 2 years.
Internet means that potential owners will find the best price. Often delivered to your home (like a washing machine). Direct sales allows control of price, promotional activity and customer relationship.
In ten years time most of the car industry will adopt this model.
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Inclined to agree. It has its positives for the consumer. No more haggling at the dealers except perhaps over trade ins will be welcomed by many. It spells doom for companies like Car Wow and Drive the Deal though. Direct sales have of course proved hugely successful for Tesla
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So who buys/owns the dealer stock sat on their forecourts?
My VW dealer regularly has trailer's full of delivery mileage VW stock delivered - only recently I was there when they had ten eUp!'s all exactly the same being prepared for resale - maybe sale or return from VW??
Would this be for brand new cars not registered?
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The dealers currently own the stock on their forecourt
At present, franchised dealers buy stock from the manufacturers at wholesale prices. They apply a margin or percentage to that price which is their profit on the sale, and they can decide to offer discounts to buyers by giving away some of the margin.
Under the Agency system the dealer no longer owns any of the stock. They may well have demonstrators supplied and belonging to VW but the sale is direct between VW and the purchaser. The dealer has no involvement in setting the price . The dealer simply gets a commission on each sale
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>> The dealers currently own the stock on their forecourt
>>
That is often not the case.
BCA - the car auction place often sell the cars to dealers on stock finance packages. BCA own the stock until the car is sold and they are paid.
Often dealers will sell the cars on their forecourts to banks and finance companies, paying them back plus interest when the car is sold.
BCA, the banks and finance companies have people that go around to the forecourts to check if the car that has been sold to them is still there. If it is not then they get annoyed with the dealer because they have sold it without repaying them (small timing differences excepted).
About 12% of my portfolio is this type of loan.
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Talking new cars here. I presume dealerships will use some sort of finance in their purchase of vehicles from the manufacturers but that doesn't really change how things work. The dealership still currently buys and owns the vehicles.
Last edited by: CGNorwich on Wed 7 Feb 24 at 14:21
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>> Talking new cars here. I presume dealerships will use some sort of finance in their
>> purchase of vehicles from the manufacturers but that doesn't really change how things work. The
>> dealership still currently buys and owns the vehicles.
>>
Depends on the set up. Some franchised dealers will buy stock, but they only pay for it when it is delivered to the showroom and for onward sale to a customer.
Showroom stock is usually sold on special "showroom" terms with extended payment terms and whether it is stock for resale or showroom stock manufacturers will often have a retention of title clause in their contract which says that they will own the vehicle until it is paid for.
If the dealer is a proper agent (as opposed to calling themselves an agent when they are not), then they are acting for the manufacturer and new cars are very likely owned by the manufacturer until handed over to the customer.
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"Depends on the set up. Some franchised dealers will buy stock, but they only pay for it when it is delivered to the showroom and for onward sale to a customer. "
Exactly but however they finance the purchase they are still buying the cars from the manufacturer which they then resell to the public
Under the "agency"model they are not. They are simply receiving a commission on a direct sale.
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We are getting in to trivia here.
The manufacturer may own the vehicle until paid. I think they do - this is what happens and we have paid for legal advice to clarify this when looking to provide loans on vehicle stock to dealers.
The dealer of course sells the stock. Pays the manufacturer. They may pay the manufacturer after the vehicle has been sold. If they do, the dealer may have sold the car but it still belongs to the the manufacturer until it is paid for. Agreements with the manufacturers allows them to do this. (Not withstanding the end buyer potentially getting good title if they buy the vehicle in good faith.)
Where this sort of payment process is in place, we cannot lend against the vehicle.
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I cam assure you, this is not designed to pass on the overhead savings to the consumer. Not sure how a non negotiable fixed price benefits the consumer.
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I doesn't particularly. It is however what you get with nearly every other consumer product and it enables the manuafacturer to take control of their marketing and pricing strategy and faclitates internet sales.
I guess its the future .
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I don't understand why you'd go shopping for a new VW anyway. They're astronomically expensive and firmly treading on Audi's toes, but without the badge snobbery or residual value.
Was browsing our company car scheme for something to replace the Model 3 which is due to be thrown away towards the end of the year, and an i7 is less car for more money. And just when you think it's already expensive you have to spec options as part of packs, so paying extra for stuff you don't want or need.
While I like my Model 3 I think the tax advantages will not justify it come October and I might just go back to a pimped-out 24 month old Volvo V60 again. Back on the dinosaur juice but hopefully not for too long.
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Because I like them!
My 7.5 GTI is best car I've ever driven.
Love them.
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"I don't understand why you'd go shopping for a new VW anyway. "
I wasn't actually seeking a discussion as to whether VW's are good cars and whether I should buy one (I already have one ) but rather rather the merits or otherwise of ending the franchise system for selling cars.
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The way new cars are financed in dealer stock varies but includes:
- loans secured against vehicles from a bank
- manufacturer credit or stock owned until sale
- dealer financed
Moving to direct sales means the manufacturer will need to find the capital to replace that previously funded by the dealer. The loans may be secured against their increased stock, possibly on better terms than the dealer.
I don't think this will be a barrier to change.
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>>
>> I don't think this will be a barrier to change.
>>
It will not for some of the larger ones.
Several manufacturers have subsidiaries that are bigger banks than the high street banks.
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I think dealers have tried this before, it didn't really work out from what I understand. Perhaps different this time.
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I don't really know what to think about this. I was quite involved with the motor trade for a while but that's over 30 years ago.
Car making is a fixed cost business. As such, volume matters and production whilst now flexible cannot easily be turned up and down. Inevitably if the sales peaks disappoint then large volumes must be sold if production is to be maintained or even reduced in an efficient way.
There are all sorts of wheezes for getting over-production into the market and I assume that will continue. For a while banks and other large fleet operators were offered exceptional incentives to change their cars at 6 months and the returned units appeared in auctions and at car supermarkets in rows. The big hirers will also churn their fleets if suitable deals are offered, and whilst the makers take a hit they hope to avoid reducing published prices, which has a huge deadweight cost.
It won't be as simple as eliminating discounts, that's for sure. There will always be fleet discounts and if high prices strangle new retail demand, I suspect there will be a compensating bulge in nearly-new car availability which is where the savvy buyers will look.
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It’s not really about removing discounts or price reduction as such. It’s all about VW taking control of the pricing of their products and having a uniform proposition across the country. VW do currently do have a discount on the id3 if you take up their finance offer it it’s the same deal for everyone. Uniform pricing is seen as essential to an internet direct sales model. Tesla have of course been massively successful with that model. You won’t get a discounted Tesla.
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Thought there were stories of Tesla massively dropping prices at certain points of year to meet targets? Could be mistaken though.
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Absolutley Tesla reduce prices. It is however across the board. You won't get a different price if you buy your new Model Y in Truro or Carlisle. Tesla set the pricing, that is the point.
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Out of interest the accounts of the company I bought my current car from:
- sales (s/h and new) were £174m which includes servicing
- they have 77 staff in the workshop so at a guess ~£6m relates to servicing and repair
- admin expenses were £18m - so crudely about 10% of sales
- they made a profit before tax of £4m = ~2% of sales
Assuming they are fairly representative of main dealer businesses - "how much of the 12% taken by the dealer will VW expect to save if they go online?".
Online is not zero cost so assume they save 7% (of the 12%) currently taken by the dealer. Better marketing, pricing, promotion etc makes a further 3%. A competitive advantage of 10% is £2-4k on typical sales - hardly trivial.
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>> Thought there were stories of Tesla massively dropping prices at certain points of year to
>> meet targets? Could be mistaken though.
>>
There were significant discounts and a lot of very annoyed customers that had just got delivery at the previously higher price.
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Volkswagen - No more haggling with the dealer - Fullchat
