Unsold used car stock up 16%

  01 October 2017 - 3:31pm |    devsupport

Car retailers are faced with rising levels of unsold used car stock, up 16% in a year, according to research from accountants UHY Hacker Young.

Stock is worth more than £27 billion, up from £23.6bn, and almost 18% of the industry’s turnover, the report claimed. It said manufacturers were pushing vehicles onto retailers, who were struggling to find space, with some having to invest in additional offsite holding facilities. This could result in tying up capital and preventing investment elsewhere.

Problems were compounded, said UHY, by challenging sales targets.

Paul Daly, UHY partner said: “Car makers continue to push more and more vehicles on to dealers’ books, but that can’t go on indefinitely. It’s unsustainable for unsold stock to keep rising so quickly.”

UHY added a further danger came from retailers becoming over-reliant on the temporary cash flow boost given to them when they take new cars on to their own balance sheets. A number of manufacturers provide dealerships with an invoice to claim back VAT at 20% on these purchases immediately, even though manufacturers are not paid until the car is sold.

Mr Daly said: “Dealers are risking a cashflow crunch if they don’t plan adequately for the cyclical nature of getting cash boosts through reclaiming VAT on unsold cars. It’s a short-term relief that can cause huge problems when levels of unsold stock begin to fall again.”

imageTags: stock, used cars

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