A good time to buy a car

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IN the calm before the storm, it is probably best to take cover. And if the financial tempest making its way from the north is as bad as everyone is saying, you might as well make a dash for a new car.

A shiny set of wheels might not be high on your list of priorities when British firms are going to the wall daily but, according to the trade as well as many industry commentators, there is no better time to buy a motor.

Treasury Minister Philip Ozouf has questioned whether Islanders are benefiting from falling prices in the UK, but dealers in Jersey are adamant that their margins are as tight as can be.

Furthermore, because most manufacturers have large amounts of unsold stock, there are – for the time being – some good buys to be had. It’s ‘for the time being’ because manufacturers are responding to the recession: cutting production by slashing jobs, mothballing their factories, reducing the working week and crying out for state aid. When demand and supply reach some form of harmony, any price bonanza will come to an end.

And UK manufacturers can’t fend off the increasingly pugnacious euro and the pusillanimous pound forever.

Federation Iain Carse is the managing director of La Motte Ford in the Channel Islands and president of the Jersey Motor Trades Federation.

‘It takes time for a manufacturer to reduce production levels,’ he said. ‘We have heard lots of stories of factories closing for a couple of months or reductions in the working week. And while they may receive some help from the UK government’s bail-out package, this doesn’t really help dealers, nor does the falling interest rate because we have contracts in place.

‘At the moment, the manufacturers have plenty of stock that they want to clear. Most will give dealers a period of grace before demanding payment for a car but there comes a time when a dealer has to decide if selling a car quickly will actually make more sense than keeping it in the showroom and paying interest.

‘In the Channel Islands we have the added challenge of working within a controlled market. We cannot sell cars elsewhere, as a dealer can in the UK, nor can we buy large quantities of cars from manufacturers.’

Having said that, dealers in Jersey appreciate that working in the Channel Islands does have its advantages – not least that recessions don’t tend to run as deep.

Indeed, that seems to be confirmed by the number of cars that were registered in Jersey last year.

In 2008 new car registrations fell by just 0.8 per cent on the year before. This compares to a reported decline in the UK of around 11 per cent.

Peter Tabb of the JMTF said: ‘On the face of it, to record a decline in new car registrations over less than one per cent is good news. However, with manufacturers trying to clear stocks, margins generally have been very low and this puts great pressure on local traders when meeting their overheads. Fortunately, the full impact of the recession tends to take time to reach the Channel Islands and, from past experience, when it does it is often significantly less.’

But while Jersey may escape the full ferocity of the credit crisis, Islanders will certainly batten down the hatches. ‘Some people will trade down, for instance, from a luxury model to a more affordable brand. This will not only save money but more expensive cars tend to devalue quicker and more sharply than cheaper ones,’ said Mr Carse. ‘Others will opt for a nearly new car, perhaps a year-old with another two years on the warranty. Others may choose to hold on to their existing car for longer.

‘Overall, there will certainly be a reduction in car sales in the longer term and I would imagine that there will be a number of dealers that run into financial problems and possibly have to close down.

‘Let us fasten our seatbelts because we are in for a rough ride. It is typical of a recession that the motor trade tends to be one of the first hit and the last to recover.’

For now, the bargains are apparently there – but for how long? Alan Osmond, general manager of Bel Royal Motors, said: ‘No one knows, but I would guess that in six months to a year’s time, new and used car prices will increase as supply falls to meet demand and the value of the pound against the euro works against us.

‘Used car prices tend to follow the trend of new cars so there will be bargains across the board at the moment. Whatever route you go down, ensure that you keep a full service record because any buyer will want to see that the car has been properly maintained.’

• Picture above: President of the Jersey Motor Trades Federation Iain Carse

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