Originally Posted by
toddhunter
There is no doubt the new car market has been buoyant off the back of aggressive market share growth and a strong NZD has meant the sort of great pricing mentioned in posts above. These all flow directly into the used car prices...the biggest influence on the used car pricing is what they new version of the same vehicle sells for.
Also important to bring some market sizing to the discussion as well...in the year to Dec 17 there were 1.142M used vehicle "change of ownerships". This was across dealer channels, and private to private channels. Over the same period there were 151k new passenger and light commercial vehicle registrations...reinforces the market research numbers I published earlier. A lot of the new car registrations will be rental fleets and corporate fleets so the true number of retail customers buying new cars is a lot less than the 151k.
What we like about the used car market is the following...
- Used cars is a less discretionary market than the new car market. In 2009 used car change of ownerships for the 12 months ending Dec 2009 were 886k, new car registrations were 70k.
- We control our go to market strategy. We don't have an OEM setting rules for how to execute in the market, lifting our rebate targets each year, telling us to invest huge amounts of capex in new buildings.
- check out our latest shareholder newsletter for the "container office" look we are implementing in our new Cambridge Terrace site in Wellington.
We have a great brand, great distribution, and great sources of supply of used vehicles...however as has been pointed out in previous posts we have work to do on the sales experience.
In FY13 Turners Auctions (pre Dorchester full acquisition) we made $5.8m NPBT...in FY17 this division made $12.3M, we have more than doubled the return in 4/5 years from focusing on this wholesale to retail transition. We are challenging ourselves from a growth perspective on other parts of the wider business. We are a business that delivers on what we say we will and I can assure everyone that the board and management are focused on EPS growth.
As an aside Beagle had asked earlier for my opinion on why some wealthy people drove old bangers and chose not to upgrade their cars. I think answer is "people". Some people choose this as part of their brand....they like being understated and under the radar. For others it will simply be the cost and hassle of change.
But what is undeniable is that most kiwis need a car to get to work and get their kids to school. Over 80% of household trips are taken in a car and this number has only been rising. Of course it doesn't mean to say it will be like this forever (perhaps we should be branching out into e-bikes!), but the vast majority of car buyers are looking to purchase a good reliable vehicle from someone they trust for under $15k. The used car market and the services like finance and insurance that support them are large and highly fragmented markets with plenty of opportunity in them.