Pre-registered cars are vehicles which have been registered by the dealer or manufacturer to themselves (so not a customer) but have not been sold. What the dealer is doing is called self-registration and this is usually done to boost sales figures on quarterly or annual results even though the cars have not actually been sold to bona fide third parties. The cars then sit around on the garage forecourt or in storage facilities and can still be around months later unsold. They are often offered for sale with a decent discount if they are models which are really not shifting and so for the customer, this could be a chance to bag a bargain says Show Plates Express – a UK based Number Plates Company
Industry commentators have been watching this trend for a number of years now as the number of pre-registered cars is on the rise and is distorting the true picture of motor sales in the UK according to the Society of Motor Manufacturers and Traders (SMMT). The SMMT is very careful to distinguish in their reporting between monthly registrations with the DVLA rather than ‘sales’; it is the latter category which includes pre-registered cars – not really sales at all. But this might not matter to the consumer who, if they don’t care about the number plate issue or having the latest model, could bag themselves a zero mileage car at a swingeing discount.
Why are cars pre-registered to hit sales targets?
The car business is one very competitive marketplace. Manufacturers set targets for franchises, monthly, quarterly and annual and based on these figures, the factories will produce enough cars to service this ‘demand’ and hence generate a profit. This target setting filters right down to local car showrooms and individual salespeople. So what are the implications if targets are missed?
If targets are missed in the UK market, there can be huge financial penalties imposed by the manufacturer’s Head Office. It is not uncommon therefore for dealers nationwide to pre-register what amounts to thousands of cars just to avoid the implications of missing their target.
What implications are there for consumer apart from the discounted price?
The car salesman may be keen to tell you that you are basically getting a new car at a great price but, in fact, a pre-registered car is not a new car. This might not matter if the mileage is very low or zero and the price is good but the customer should be aware of exactly what they are buying. There may be a very small amount of mileage on the vehicle as it could have been used for test drives or moved around from one dealership to another but a pre-registered car is most certainly a used car. Here are some of the fine distinctions and why this does matter:-
- The car was originally registered to the manufacturer or the dealership so they will be the original owner of the vehicle listed on the logbook or V5C so the consumer will be the second owner. This may not matter if you keep the car for a long time but if you want to sell it quickly then the car will have a lesser value with two previous owners than if it had just had one
- The manufacturer’s New Car Warranty will have started from the date of registration and so if the vehicle has been sitting in a compound for ten months then the purchaser will lose nearly one years worth of warranty cover, easy to overlook when you think you are buying a new car
- Breakdown cover for the warranty period will also be reduced as the warranty period has actually been running whilst the car has been sitting in a secure compound somewhere
- Pre-registered cars are usually the older models in a range. When the cars are updated, dealers and showrooms always struggle to generate interest in what is old effectively old stock even if they are zero miles or just have a tiny mileage and so these cars are classic candidates for pre-registration
- If you are enthusiastic about deals and rates you see advertised online or in the press, then bear in mind that a pre-registered car is not a new car although to all intents and purposes it may seem like one. This means that attractive interest rate deals will not apply and if a deposit contribution is offered by the dealership towards a new car, then a pre-registered car may not qualify for this either. So although the advertised cash price on the car maybe a few thousand cheaper, if you take it on finance then this probably will not be reflected in the monthly payments
What kind of financial benefit should you receive on a pre-registered car?
The depreciation of a new car in the first year of its life is eye-watering and so you should expect to see a serious discount offered on a pre-registered vehicle and its sale price should be nowhere near the new car price. The dealer may argue that condition is ‘as new which is probably true but this doesn’t affect the real value of the car.
The constant push from manufacturers to sell more and more cars is squeezing car dealers ever tighter so this means that there is a glut of pre-registered cars and this has probably just got a whole lot worse with Covid-19. It can be a real bargain time for a savvy car buyer if you are not worried about having the latest model or gadget. However, it is always worth comparing the true picture with a pre-registered car with the offers available from the dealership on brand new models. New car deals are always really attractive so it will to some degree depend on whether you want to keep the car long-term or not and how much of the warranty has expired and ultimately, how good the price is.
What impact will Brexit have on the motor industry pre-registering cars?
At this stage, no-one really knows and actually, Coronavirus is likely to have or already has had a bigger impact on car sales than Brexit probably ever will.