UAE Market February 2012: Get the price point right say experts
Quality used cars: dealers told to pay more and sell for less
By Shahzad Sheikh
Autodata Middle East’s monthly report on the state of the UAE market for February paints a picture of turmoil in the used car trade.
Stop undervaluing trade-ins
Bill Carter, Head of Valuations at Autodata Middle East is lambasting dealer groups who are bemoaning the lack of quality used cars in the market to put on their forecourts, whilst at the same time refusing to cough up and pay owners an appropriate value for their trade-ins.
‘Whilst we fully understand the need to make a profit, after all that is the reason we are all in business, there has to be a balance,’ says Carter. ‘So the choice is either big profits from dwindling stocks or sensible returns from increasing stocks and high customer retention? I know which route I would take.’
He warns that as the industry is turning more to the used trade to bolster its revenues, it’s got to be more professional about appraising and valuing customer’s car, both in terms of providing good customer service and not insulting your customer (after all you do want to retain their business don’t you?).
50k price point
Lately the team here at MME has been staggered at the entry prices of some performance and premium cars, with prices of some of the cars we’ve been testing lately well over the AED250,000 mark.
But how relevant are they really? Not much, according to Autodata, which says that a keen price point is becoming more and more important to buyers.
‘It would seem that consumers are worried about job security and so are targeting the lower priced vehicles and ignoring anything over AED50,000.’
This viewpoint also underlines the fact that new and used car dealers need to drastically reduce their margins and go for volumes.
And nearly new prices need to get far more competitive, as Autodata is also saying that prices for cars a couple of years old in the 50-150k bracket are too close to the prices of brand new editions. Dealers need to be honest about depreciation which is nearly always massive in the first 1-3 years (usually over 30% in the first year on average) and slows down after that.
Strong residuals for Range Rover
We love the Range Rover, and we’re not alone in the UAE. The Autodata researchers are confirming that the ‘residual values tend to maintain a steady depreciation pattern with the only variations from the curves being when a significant update or model change takes place’.
For example when the engine changed from 4.4-litres to 5.0-litres, the depreciation slowed. So the price gap between a 2010 car (with the new engine) and the 2009 is about AED50k, whilst it’s only about half that dropping down to the 2008.
‘This pattern will continue through until we see a replacement model which is rumoured for 2014 model year,’ they add.
