On 5th November a BBC online news item entitled "Scrappage sees UK car sales surge" reported that new car sales had recorded their biggest increase so far this year in October, helped by the scrappage scheme. "Encouragingly, there has also been an increase in demand in the fleet and business sectors, which will be critical in sustaining recovery next year," the BBC reported SMMT chief executive Paul Everitt saying.

On 11th November, another BBC online news story reported, "UK trade gap widens in September". The UK trade deficit widened more than expected in September, it said, led by a jump in car imports as Britain's scrappage scheme helped foreign carmakers. The difference between what the UK exports and what it imports was £7.2bn in September, well above analyst expectations of a £6.1bn deficit. September's overall trade deficit was the biggest since January.

Who'd have thought that one might cause the other?

When completing a telephone survey you don't obtain an interview from every call. But for franchised dealers we usually complete an interview for every two or three contacts. We call this our 'hit rate'. Lately out 'hit rate' for franchised dealers has fallen from one interview per two or three calls to one in six and the reason is fairly clear - redundancies combined with holidays. The downturn, and dramatic fall in new car sales, has hit franchised dealers hard and they have been forced to act on staffing levels and the average number of staff employed has fallen by over 10% from a year ago.

Digging deeper, we note that car sales executives and service technicians have been affected most by either 'natural wastage' or redundancies. Given that two-thirds of the staff in dealerships work in these positions, it is hardly surprising. But as sales executives and service technicians are responsible for generating sales, are cuts here a sensible choice?

Obviously every franchised dealer has to act swiftly and responsibly to economic conditions otherwise they could join the burgeoning list of failures. Our point, though, is that it might be better to cut jobs in non-productive areas and/or ask employees to accept fewer hours, and therefore less pay, or simply reduce pay rates. This might seem controversial, but other industries and retailers are implementing such options successfully.

Preparing for our forthcoming service report update, we have investigated the effects of the recession on franchised dealer service department revenue and the fall in service sales is around 12% - accounting for both retail and internal (new car preparation). The average dealership employs just short of six technicians so by making one technician redundant, or not replacing one who leaves, the productive capacity is reduced by 17%. The shortfall has to be made up by the remaining five technicians through increased productivity, thus increasing bonus, or overtime working. More than that, we have found a large number of dealers disinclined to take on apprentices, who almost always contribute to overall productivity.

The upshot is that the savings are nowhere near as large as might be expected and it is a similar story in the sales department especially as salaries are highly-geared to commission. Clearly every case is different, but it is well worth considering all the options with staff before acting.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in July 2009. (See www.auto-retail.com for subscription details.)

Motor Trade Business Management Award
Sponsored by ASE incorporating Trevor Jones
Winner: Julie Oliver, Mitchell North West

Most Improved Business Award
Sponsored by NIG
Winner: L&L Automotive Mercedes-Benz Hertfordshire

Customer Care Award
Sponsored by Car Care Plan
Winner: Ken Jervis (Kia) (Stoke-on-Trent)

Aftermarket Innovation Award
Sponsored by Mobil 1
Winner: Ken Jervis (Kia) (Stoke-on-Trent)

Marketing Award
Sponsored by AutoTrader.co.uk
Winner: The Car Shop (Northampton)

Website of the Year Award
Sponsored by Motors.co.uk
Winner: Sytner Group Ltd (Leicester)
Highly commended: Clive Sutton, Holden Group

Product of her Year Award
Sponsored by Motor Trader
Winner: Castrol Professional - Red Carpet Training
Highly commended: Motor Codes

Used Car Retailer of the Year
Sponsored by Aviva Driveaway Insurance
Winner: Thame Service Station (Oxfordshire)
Highly commended: TC Harrison (Derby)

Bodyshop of the Year
Sponsored by Britannia Accident Assist
Winner: AJC Wilson Bodyshop (Essex)

Garage of the Year Award
Sponsored by Motor Codes
Winner: Academy Group (Manchester)

Car Franchise Of the Year Award
Sponsored by Mondial Assistance
Winner: Kia Motors (UK)

Service Adviser of the Year Award
Sponsored by Castrol Professional
Winner: Michael Allison, Sinclair Volkswagen
Highly commended: Jazz Mann, Chiswick Honda (London)

Sales Team of the Year Award
Sponsored by MAPFRE Abraxas
Winner: L & L Automotive Mercedes-Benz Hertfordshire

Sales Manager of the Year Award
Sponsored by Dealerweb
Winner: Gareth Lloyd Sinclair Volkswagen

Dealer Principal of the Year
Sponsored by eBay Motors Pro
Winner: Amarjit Shokar Romford Mazda (Romford)

Franchised Dealership of the Year Award
Sponsored by Experian
Winner: Now Kingston (Middlesex)

Dealer Group of the Year Award
Sponsored by HPI Finance Gateway
Winner: Sytner Group

Outstanding Achievement Award
Sponsored by Aviva
Winner: Robert Forrester (Vertu Motors)

The RAC Foundation has very different objectives to the authors of 'The Lex Report' who focused entirely on issues of importance to dealers. But then the RAC Foundation was established to protect the interest of the motorists whereas Lex was, at the time, the UK's largest dealer group. Essentially the new report is about the changing nature of car ownership and in many instances the data follow trends over decades. Unlike its distant predecessor, however, this new report is not based on a substantial and original survey but assembles various sources including government statistics. Nevertheless it is an extensive piece of work and many of the key findings and conclusions are crucial indicators for motor retailing.

Unsurprisingly the study finds that cars totally dominate travel in the UK. Quite simply with 85% of individual travel by car, no other form of travel comes even close, which has to be good news for motor retailing. But the report does point out that whilst car use has grown for nearly half a century, this trend now seems to have come to a halt with growth since the early 2000s only in proportion to increases in the adult population. The authors say that the reasons for this are unclear; however it seems to us that their reported 'saturation' of driving licence-holding of 70% of adults might be an important contributor.

Low-income households have experienced the most growth in car ownership over the last ten years. And although there has been some convergence in car use between low income households and the average population the difference is still large. The study confirms that car owners highly value the freedom and independence a car offers. In particular there is reference to the necessity of cars for work, shopping, and even after-school child escort trips for parents. Compelling evidence is provided to suggest that the vast majority of drivers have little interest in public transport and the report points out that between 80 to 90 per cent of people say they would find it difficult or impossible to adjust their lifestyles without a car.

Drivers are, though, not unaware of the costs of owning a car - economically and environmentally. People do adjust car use according to economic pressures, but most cannot envisage a future without their cars and most would go to considerable lengths and expense to maintain their ownership and use.

You cannot help feeling after reading this report that cars are a necessity and it would take events of seismic proportions to change usage patterns, which in the long run has to be good for retailers.

The Car in British Society can be downloaded as a PDF file at www.racfoundation.org.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in June 2009. (See www.auto-retail.com for subscription details.)

The background to the present troubles began with a financial crisis in the banking system in 2007, followed by a credit crunch in 2008, which has resulted in worldwide recession. The UK government and the Bank of England have taken fiscal and monetary measures to lessen the effects of a potentially severe recession, but so far these actions appear to be having a limited effect on the fundamental problem underlying the recession - the unwillingness of banks to resume lending to small businesses and consumers.

The consequences for car sales have been dire. Registrations of new cars to private buyers were down by 11% in 2008 compared with 1999, but they were down 44% compared with their peak of 1.25 million registrations in 2003. Sales of used cars have remained more resilient falling by an estimated 3% between 2003 and 2008 but still 12% higher than the 6.46 million used sales in 1999.

We estimate that the total retail car finance market including dealer point of sale (POS) and direct lending declined by 50% in value between 2003 and 2008. In real terms, taking into account the effect of inflation, the market fell in overall value by 58% between 2003 and 2008.

The dealer POS car finance market declined in value by 17% between 2003 and 2008 with the number of finance transactions declining by 23%. So clearly the dearth of available direct lending is a major cause of the present problems in the new and used car markets.

Competitors in the retail motor finance market comprise vehicle manufacturers' captive finance companies, independent finance companies, the high street banks and building societies, and other direct lenders. The number of independent finance companies operating in the UK motor finance market has declined over the past decade, due largely to consolidation effected by mergers and acquisitions.

The independent finance companies rely on their bank parents for long-term funding, but the banks' need to shore up their own balance sheets, and coupled with their inability to raise funds cheaply in the wholesale markets, it raises questions over the long-term future of their motor finance subsidiaries. Here in the UK vehicle manufacturers' finance companies need to access state-funded liquidity and credit guarantee schemes to continue lending, which they have so far been unable to do.

Recovery of the new and used car markets, particularly retail, clearly depends on the availability of finance. We estimate that the total number of loans and finance transactions for both new and used retail car purchasing fell by 51% between 2003 and 2008. And although our forecast for the next five years is for an increase of 38%, this falls well short of 2003 levels and represents a market volume similar to 2006/07.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in March 2009. (See www.auto-retail.com for subscription details.)

The starting point for any prediction of the future prospects for new car sales is the long term trend. What happened in the past? The download chart records new car registrations between 1959 and 2007 and then runs forward with predictions to 2013. Highlighted in red are the years affected by recessions - 1974/75, 1980/81, 1991/92 and 2009/10 (prediction).

At first sight the consequences of previous downturns appear similar. In '74/'75 new car sales fell by nearly 25% and took six years to recover to pre-recession levels. The fall was less at 12.6% in 1980/81 and the recovery only took four years even though the recession was severe with GDP falling by 6.1% between its peak in 1979 and its trough in 1981. A fall of 20.7% occurred '91/'92 and it was another six years before new car sales reached the same level as 1990.

Arguably, though, the consequences of the 1990s recession were actually worse because, as now, new car sales started to fall earlier (in September 1990) and the fall was 31% from the high of 1989 with the recovery taking 12 years on this basis. The present situation has some similarities to '91/'92; new car sales were already falling since the peak in 2003 and have deteriorated substantially since August 2008.

The most optimistic scenario is that shown, which is based on new sales in September 2008. The prediction is 1.78 million new car sales in 2009 - a fall of 18% from 2008 - followed by 1.8 million in 2010 and a six-year recovery period to the same level as 2008. However the picture is potentially much worse if you start with 2007's sales and apply the fall of the early 1990s. This works out as 1.66 million registrations in 2009 and a recovery of 12 years. The downturn could easily be this bad or worse if for no other reason than the present dearth of credit. Back in the early 90s credit was not really an issue if you could afford the sky-high interest rates - the Bank Base Rate reached 15% in 1990.

Our own assumption is the best-case scenario and we have utilised this in several market models already including our recent report on the UK market for servicing and repair. And thinking about servicing and repair this is surely one of the more recession-proof areas, or is it? If new car sales fall as shown, then there will be a consequent reduction in the 0-4 year old car parc of 20% within five years and thus less work for franchised dealer service departments, which rely on younger cars. Overall we don't believe the market for servicing and repair will fall appreciably because when motorists hang on to their cars they eventually have to spend money on maintenance. So servicing and repair is potentially an upside provided dealers act decisively to retain service customers with older cars. The simplest strategy is to retain customers who bought used cars from the dealership. Service retention levels for used cars sold by dealers average 22% but the best performing dealers exceed 40%. It almost goes without saying that upselling service customers is now crucial.

While the new car market has suffered badly in previous recessions, used car sales have been more robust - dropping less than 10% and recovering more quickly. This time it could be more tricky if credit is problematic, but the big slide in used car values does make used cars more accessible and perhaps easier to finance.

As always when business is tough, expenses and overheads must be reined in. Staff cutbacks are inevitable and in 1991/92 the average franchised dealer reduced staffing levels by 15%. Quite simply seventy per cent of an average dealer's total gross profit is spent on wages and salaries, and therefore a 15% reduction here is worth considerably more than a 15% reduction elsewhere.

You view on the final upside depends what happens to your dealership. In the last five years 17% of franchised dealer sites have closed down. In the next five years we believe another 14% are likely to go. Clearly this means more business for those that remain, which was certainly the case after previous recessions.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in December 2008. (See www.auto-retail.com for subscription details.)

Discussing the scheme, Auto Retail Bulletin's May issue helpfully notes that when it went live on 18 May, it was still not clear how HMRC would treat the VAT involved in the scheme, particularly where it may involve VAT-registered light commercial vehicle dealers who would not normally pay VAT at the point of sale.

The scheme has been introduced with an apparent lack of joined-up government among the government departments and agencies involved, and with apparently an at best lukewarm blessing from The Treasury. As Professor Garel Rhys has noted, it stands to boost the sales of a number of dealers, but only those of Nissan among the UK's remaining car plants, since 86% of UK-sold new cars are imported, and the rest are all far beyond the reach of those who've made do with old bangers.

Some of us think all scrappage schemes are market-distorting and create sated consumers to dampen a future recovery based on consumer confidence in paying real, sustainable market prices. At least in the UK scheme's case, it hasn't been clouded with dubious claims of environmental benefits. And we can take comfort from the modesty of the UK scheme. The Germans have spent €2.5bn on allowing clunker owners to swap ancient Polos for cheaper new Porsches should they wish, and they can buy them in Poland if they prefer.

While we estimate that if the average price of a scrappage incentive-driven new car purchase in the UK is £8,500 or so, the Government's £3,000,000 budget for the scheme will be more or less recouped by VAT receipts that HMRC would not have had without the scheme. So at least the rest of us won't have to pay for other people's new cars.

Toby Procter
18 May

Auto Retail Bulletin is a subscription journal to which Trend Tracker director Chris Oakham contributes a monthly column on topical auto retail and aftermarket issues. Our thanks to editorial director Rupert Saunders.

The UK Retail Car Finance Market 2009 from Trend Tracker analyses the impact of the global financial crisis and the recession in the UK from a longer-term perspective, basing market forecasts to 2014 on a clear understanding of trends in market volume and value since 2003. If you work for a company that will still be around to exploit the coming recovery, you will need to understand just how far the market has moved since before the crisis erupted. You need to assess how vigorous that recovery is likely to be, and understand why it won't restore demand even to the level of three years ago. This report will help you do just that.

There's no doubt the motor finance market is influenced by complex factors. It plays chicken-and-egg with supply and demand for new and used cars, just as inter-bank lending and retail credit are also directly, painfully related. Finance oils the wheels of car sales, but it can also lock them up, as now. Understanding the complexity of the factors behind the trends is what distinguishes Trend Tracker as the preferred source of intelligible, relevant data to so many major companies in the UK automotive sector.

While the full extent of toxic debt in the banking system is still unknown, and the full horror of 2008's decline in new car sales has yet to be revealed, it's still possible to see clearly beyond the current crisis. Trend Tracker remains confident that our analysis fully supports a rational forecast for the finance market's direction out of the crisis. A forecast that suppliers would be wise to heed when assessing the resources they will need in future.

Please go to the 'reports' section of our website to download the detailed contents pages and list of tables and charts for this report to see if it really can help you plan a post-crisis future for your business.

Available now the report is £1,450 + VAT for a PDF file and bound copy. You can buy the report using your credit card online now and download a zip file containing a PDF of the full report and a 15-slide Powerpoint summary. The hard copy will then be despatched to you within three working days. Alternatively phone us on 0870 421 4350 for other ways to buy.

These individual pages cover:

• Bodyshop Painter / Panel Beater
• Bodyshop Foreman / Estimator (job description for Estimator only)
• Bodyshop Manager
• Bodyshop Receptionist / Adviser
• Car Sales Executive (job description for Sales Executive but salary details merge Sales Executives and F&I Managers)
• Dealer Principal / General Manager
• Dealership Accountant
• General Clerical Assistant (job descriptions are for Ledger/Accounts Clerk, Database Controller, Accounts Assistant/Cashier and Sales Administration Assistant
• Sales Manager (job description for General Sales Manager)
• Parts Counter / Warehouse Assistant
• Parts Manager
• Parts Sales Representative / Telesales (no job description available)
• Parts Delivery Driver / Van Sales (job description for Parts Delivery Driver)
• Service Department Clerical Staff (job description for Warranty Administrator and Service Receptionist
• Service Mechanic (no job description available)
• Service Foreman / Workshop Controller (job description for Service Foreman)
• Service Manager
• Service Receptionist
• Service Technician