The Danish new car market continues to go from strength to strength with 2016 reaching an all time high of 259,555 units (222,927 new car and 36,628 light commercials).
Like so many European countries the leasing market is helping contribute to much of this growth, with leasing volumes growing from 38% in 2015 to 43% at the end of 2016. A reduction in the registration duty on new cars from 180% to 150% has also been introduced over the past 18 months.
Van and personal leasing are growing
There have been two major growth areas, in van leasing and personal leasing, both areas where Autorola is the market leader of inspection and online remarketing services.
”The Danish economy continues to grow and businesses are using leasing as a cost effective way of buying a new light commercial to help fuel their expansion. Van sales have grown by around 25% since 2014,” said Pedersen.
Short term flexi leases are a growing trend
“Manufacturers are making car personal leasing very attractive not just with low interest rates, low deposits and low monthly rentals, but the flexibility of leases are such that a consumer can walk away from a lease after just a year by giving just one month’s notice. Consumers are turning these agreements into short term flexi leases which the Danish market hasn’t seen before.
“This trend is fuelling the growth in 12-18 month old used cars coming from the lease sector, which is traditionally the replacement cycle adopted by rental companies,” he added.
New used car retail brands help reduce the risk of flooding the market
Rather than risk flooding the market full of nearly new used cars both sectors have created new retail brands where consumers can buy a subscription to a nearly new car and then hand it back after a minimum of three months.
Leasing and rental companies are generating three to four more paid subscriptions before they are selling the cars into the used market when the car is still only 30-36 months old.
Each car is inspected a number of times before disposal
“We have had to revise our business model by providing inspection and refurbishment services to the same car a number of different times before it is eventually sold on our online remarketing portal, “ said Pedersen.
“This more flexible approach to car ownership has been greeted positively by the consumer and generally used car prices continue to stay strong in the market.”
Personal lease drivers hand their car back to Autorola
A growing number of personal leasing drivers are returning their end of lease vehicles back to one of Autorola’s eight storage centres in Denmark which process tens of thousands of end of contract lease vehicles each year.
“Generally the Danish driver enjoys being part of the dehire experience. We have worked hard in our vehicle inspection and check in processes to ensure we use language that a consumer will understand. When we take them through their end of contract inspection we have to justify their de hire costs before they will sign their paperwork
Consumers accept dehire costs when they are explained clearly
“Our inspection system automatically generates costed damage repair estimates identical to those used by the insurance industry. When we explain in detail on how a repair works including the cost of labour and materials generally the consumer accepts the dehire costs,” said Pedersen
Used car prices have also been helped by the reduction in registration tax from 180% to 150% as the tax affects used as well as new cars. This has meant a greater demand for Danish cars for export, where previously buyers were put off by the high prices.
Tax changes could increase the amount of used cars exported
A major challenge for motor dealer groups is the change in tax regulations. Normally Danish used car dealers can buy used cars including Tax and VAT, but now the majority of returned vehicles from the leasing industry are without Tax and VAT.
If the Danish used car market does not learn to manage the new tax regulations, then there will be almost no cars available for them to buy in the market and Danish leasing companies will be forced to export them.
Dealers can reduce costs and increase their stock
There are advantages associated with the Danish car dealers being able to buy cars without Tax and VAT including a lower purchasing price for the car because the Tax and VAT is only paid when the car is sold and registered by the Danish authorities.
The used car dealer will have lower financial inventory levels as well as have more cars in stock, giving dealer groups who can manage this new legislation situation a major advantage in the market.