With the recently announced purchase of BCA and the stated intention of their new owners Clayton, Dubilier and Rice that it will support BCA as it pursues long-term growth opportunities and expansion into new countries it is worth considering the 'remarketing differentiation' between the UK and Mainland Europe.
When reviewing European remarketing markets it is worth noting that the used car market in the UK is extremely sophisticated and certainly well advanced in comparison to other major western European countries such as France, Germany, Italy and Spain.
In the UK, used cars have been seen as a profit centre for decades, an attitude which is slowly evolving in mainland Europe, where used cars have generally been considered as something of a ‘needs must’ if a dealer is going to sell new vehicles.
Germany has a comparable used car market size to the UK, although if the larger population (20million in excess of the UK) and its history of cross border trading particularly in emerging markets is taken into account it can be seen that the UK is significantly the most developed European market for used car trading.
1)Professional ‘physical’ auctions were first opened in the UK during the mid 1940’s to facilitate the sale of goods and vehicles that had been used in the Second World War. The format of vehicles auctions which had been refined over 40 years in the UK was first ‘exported’ to mainland Europe during the 1980’s when BCA opened their first centre in Holland. Auctions did exist in Europe prior to BCA’s expansion but not in the same scale or with the same processes.
2)Valuation guides were first published in the UK in the 1930’s, enabling all industries allied to the motor trade to use the same guidelines. This facilitated the movement of vehicles as the majority of ‘wholesale’ buyers and sellers were using the same data. Similar guides were not available in mainland Europe until the 1990’s and in emerging markets these guides do not exist today. In day to day business, whilst a valuation of a vehicle is and always will be subjective, professionally compiled valuation guides are a vital enabler in regard to a consistent remarketing market.
3)Almost 70% of all new vehicles registered in the UK are purchased by companies for use by their employees. Many of these vehicles are operated by leasing companies who need large scale remarketing channels to help them dispose of vehicles in a continuous three year cycle. Dealers therefore have regular access to and become reliant on large volumes of used vehicles being available from remarketing companies.
4)VAT – Value Added Tax, the UK government taxation scheme which has applied to used vehicles in the UK since the 1960’s basically levies a tax on a motor dealers profit margin. Until the mid 1990’s the VAT levied on a used car in mainland Europe was calculated as the sale price plus VAT at the prevailing rate – this made the resale price too high and therefore dealers actively discouraged customers from trading in vehicles and a high number of vehicles were sold by ‘private treaty’ therefore negating the need for scale remarketing channels. However due to the large scale of consumer to consumer sales buyers and sellers in mainland Europe were early adopters of the internet a remarketing channel which is very widely used. All European Community countries now use the same VAT scheme as that used in the UK. But with such an active private sale market the need for scale remarketing is much reduced.
5)The UK is unique in Europe in regard to the steering wheel of vehicles being on the right hand side. This means that surplus vehicles cannot be sold across borders but rather it has to be dealt with ‘locally’ therefore a huge remarketing industry has grown to accommodate the vehicle ‘churn’ An average of 2.75 remarketers, dealers or wholesalers are involved in the purchase and sale of a used vehicle between the first and second owner.
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